Lt oct 2014 by Raj Misra

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October 2014

MARKET TRENDS SLUGGISH CARGO GROWTH

TRANSPORT MANAGEMENT BETTER TRANSPORTATION

Cover Story

Transport Infra 2.0: Call for Convergence

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Volume 5: Issue No.6 * October 2014 Raj Misra

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Transport Infra 2.0: Call for Convergence Edit Note News Brief Market Trends Perspective Highway Notes

08 10 16 20 42

MARKET TRENDS Sluggish Cargo Growth

INTERVIEW Julian Michael Bevis

PERSPECTIVE Fire & Ice

EVENTS FSC scores a hat-trick

EDIT NOTE

New Version for Transport Infra

Its not clearly the issue of what to do? Its rooted more in the proposition of how to do it? The new man in command of the union government Narendra Modi has just shown to us a grand vision of making India a global manufacturing powerhouse (a critical missing link in Indian economy’s profile) and given his track record of being an administrator who believes in going beyond rhetoric (no secret that he is also industry friendly), some serious action meant to rejig the manufacturing sector is certainly expected. The new government’s promises (that includes bringing the economy back on the path of high growth rate trajectory asap) bode well for the infrastructure sector which has been lying in a state of comatose for last couple of years. While on one hand there has been falling investments, the more disturbing trend is that of projects getting stuck mid-way. According to an estimate, over 200 major infra projects have been stalled due to some reason or the other in recent years. So if the government means business, many of these projects are likely to be set on the rolling block once again. But a much larger issue is: what should be the right approach for putting the grand infra facelift design? The entire eco-system is besieged with structural and procedural bottlenecks which have taken deep roots. This was the key issue discussed at FICCI’s annual India Infrastructure Summit (this publication was a media partner of the event) held last month and our cover story in this edition tends to highlight the possible solutions which leading stakeholders are talking about. The big takeaway of the deliberations was clearly to look at the convergence of key transportation infra components – roadways, railways, ports and airports. The majority voice clearly underlined the urgent need to have an integrated planning for the future and all modes should be developed in a way that they complement each other. And for this, a spate of measures have been suggested which includes giving green signal to adequately planned project, attracting long-term financiers (and not just commercial banks), promoting quality based selection, integrated development of ports, clear and implementable PPP policy for railways, etc. It was quite heartening to note that now there is a greater realization to make serious efforts in reducing logistics cost – an ingredient without which India’s dream of becoming a manufacturing magnet would not be possible and so would be our aspiration to improve our ranking in the global list of ‘Ease of doing business.’ And all this would need the evolution of the new version of transport infra.

Waiting for your response Ritwik Sinha ritwik@logisticstimes.net LOGISTICS TIMES August 2011

NEWS BRIEFS

CII Business Confidence Index Shoots Up Second Time in a Row Indicating a sharp improvement for the second consecutive quarter, the CII Business Confidence Index (CII-BCI) for July-Sept quarter FY15 has shot up to 57.4, up from 53.7 in April-June quarter and 49.9 in Jan-March quarter this year. During the same quarter last fiscal, the index had touched the all-time low value of 45.7. The number 50 is the dividing line on the index between positive and weak business confidence. Commenting on the upward march in the value of index, Chandrajit Banerjee, Director General, CII, said that “the determination shown by the new government at the Center to provide an impetus to growth along with reviving the ‘feel good’ factor has sent the business confidence index soaring for the second quarter in a row. In order to capitalize on the early signs of improving business sentiments, we must ensure that this momentum is maintained going forward.” The 88th Business Outlook Survey is based on responses from over 150 industry members. Majority of the respondents (44 per cent) belong to largescale sector, while medium scale companies comprise another 12 per cent. Around 38 per cent and 6 per cent respectively are from the small-scale and micro firms. Further, 60 per cent of the respondents are from manufacturing and 36 per cent are from the services sector. The highest percentage (41 per cent) of respondents expected GDP in the current fiscal to expand by 5.05.5 per cent, up from sub-5 per cent growth witnessed in the last two years. In fact, 30 per cent respondents expected GDP to grow in a range of 5.5-6.0 per cent in FY15, which indicates that 6 per cent growth is within reach this year. We have already started this financial year on an impressive note with the first quarter GDP recording a growth of 5.7 per cent, up from 4.6 per cent in the previous quarter. WPI Inflation is expected to average 5.5-6.5 per cent in FY15, which is slightly on a higher side considering the likelihood of a sub-normal monsoon this year. “The management of inflationary expectations through supply-side measures would hold the key for ensuring continued momentum of economic revival”, suggested Mr. Banerjee. The expectation of higher economic growth in the current fiscal is rooted in optimism about the overall demand situation. A significant 77 per cent of the respondents expected their sales to increase in the JulySep quarter, much higher than 50 per cent respondents in the previous quarter. Similarly, 49 per cent of the respondents expected their export orders to increase in July-Sep quarter compared to 39 per cent respondents LOGISTICS TIMES October 2014

in the previous quarter. The revival in domestic and global demand has resulted in a majority (46 per cent) of the surveyed businesses contemplating new investment in the July-Sep quarter, whereas only 10 per cent expected contraction. This indicates that economic recovery is sustainable, provided we maintain the demand momentum, where the monetary stance by the Central Bank will play a crucial role. The businesses, besides undertaking new investments, have started experiencing a rise in capacity utilization. Nearly half (49.5 per cent) of the respondent firms expected their capacity utilization to exceed 75 per cent in July-Sep quarter of FY15, up from 34 per cent respondents in the previous quarter, which augurs well for the turnaround of the economy. CII survey has observed a sharp decline in the percentage of respondents reporting increase in inputs costs related to raw materials, energy and employees in the Jul-Sep quarter as compared to the previous quarter, which is in line with the official data specifying the current moderation in inflation rate. Expectation of recovery in sales, coupled with sharp decline in input costs, has led to a rise in percentage of respondents expecting an increase in profits after tax (PAT) in the July-Sept quarter to 40 per cent as against 36 per cent in the previous quarter. On the other hand, the percentage of respondents reporting a decline in PAT between the two periods declined from 30 per cent to 20 per cent. A slow pick up in global demand, high inflation and rising borrowing costs are cited to be the top three concerns of the respondents. “While we can do little about addressing the global slowdown concern, all policy options must be explored to tackle the problem of inflation and high borrowing cost. At a time when economic recovery needs to be strengthened, the ideal policy instrument would be to manage inflation through supply-side measures, and make a direct intervention to reduce borrowing costs”, Banerjee added.

India’s seaborne trade may cross 830 mt by 2016-17

Growing at a compounded annual growth rate (CAGR) of over eight per cent, the seaborne trade in India may cross 830 million tonnes (mt) mark by 2016-17. This is the major highlight of a report recently released by industry body ASSOCHAM. “This would require massive investment to the tune of over Rs 17,000 crore as there is a need to augment the port capacity by over 140 mt from the current level of about 690 mt,” according to a study titled ‘Shipping Industry: Today & Tomorrow.’ “The private sector participation is imperative for such huge investments in the shipping sector,” said D.S. Rawat, national secretary general of ASSOCHAM while releasing the chamber’s study. “Lack of level playing field for the private operators, hinterland connectivity, especially lack of coordination between road, rail and port authorities and proper risk allocation are certain key issues affecting port development in India,” Rawat added. “These issues must be addressed for enhancing and increasing port capacities and efficiency.” The government needs to act as a facilitator to

create opportunities for attracting fresh investments in the shipping sector, more so as about 41 per cent of India’s fleet of ships belong to the 20 plus age group indicating a slow rate of new fleet addition, highlighted the study prepared by ASSOCHAM Research Bureau. “This augurs well for the Rs 7,300 crore worth India’s shipbuilding and ship-repair industry as 20 years plus older ships require more frequent and extensive repair and maintanenance,” Rawat said. “However, this makes Indian fleet less competitive as mostly young vessels below 15 years old are often preferred in international trade.” The drastic decline in share of Indian ships in carriage of overseas trade over the years is a significant concern, he added. Indian shipping carriage dropped from about 36 per cent to just about eight per cent during the period from 1990-91 and 2009-10, highlighted the ASSOCHAM study. “This is causing a drain on precious foreign exchange in terms of payment of freight charges and this could instead be used for other high priority imports and scaling up infrastructure facilities,” said Rawat. India can save upto a whopping Rs 26,000 crore by 2016-17 if we can increase the share of coastal shipping in total traffic carriage thereby reducing the burden on other modes of transport, pointed out the ASSOCHAM study. There is a need to encourage coastal shipping as a viable mode of bulk freight transportation as it has just about three per cent of share in carrying regional traffic. According to the ASSOCHAM study, there is a need to improve the ports’ connectivity as Indian ports find it difficult to handle additional traffic due to slow evacuation process. LOGISTICS TIMES October 2014

NEWS BRIEFS

DHL Express announces its 2015 rate adjustments

DHL Express, the world’s leading international express services provider, recently announced a general average price increase globally, effective January 1, 2015. In India, the average price increase will be 9.9%. “DHL Express is committed to delivering great value for customers, and our annual price increase is one of a number of factors that allows us to ensure service excellence and a competitive offering over the longterm,” said Ken Allen, CEO, DHL Express. “We have a world-class express delivery network, in which we

invest around EUR 500 million each year. Our major investments in 2014, including new facilities in Japan, the Middle East and North Africa, upgraded facilities across the UK and additional flights in all regions, have further strengthened this network. Perhaps more importantly, we have continued to invest significantly in our employees through our Certified International Specialists program, with the aim of instilling an insanely customercentric culture at DHL. All of these measures are focused on helping our customers connect with their international partners, grow and prosper.” “DHL’s annual rate increase is driven by the continuous investments made in the country to support growth and improve quality despite the impact of inflation on input costs. We are also faced with the added pressure of the depreciating rupee but are committed to continuously improve our service quality to our customers,” added RS Subramanian, SVP & MD, India, DHL Express. DHL Express adjusts its prices annually, taking into account inflation and other rising costs in each of the more than 220 countries and territories that it serves. Price adjustments will vary from country to country, depending on local conditions, and will apply to all customers where contracts allow.

CRWC inks agreement with IWAI With the objective of enhancing its presence in the north-eastern region in the country, Central Railside Warehousing Company (CRWC) recently signed an agreement with Inland waterways Authority of India (IWAI) for taking over facilities at Pandu Port complex of IWAI at Guwahati. CRWC is planning to provide logistics solutions for various stake holders operating in NE by providing viable alternative in form of cost-efficient and eco-friendly mode of transportation over National Waterways No. 2 in association with IWAI. The existing facility at Pandu Port complex comprises two warehouses along the full rake Railway siding besides permanent jetty for facilitating waterways movement. Logistics cost in North-East is on a higher side owing to over stressed LOGISTICS TIMES October 2014

National Highways and limited extent of rail network and in such scenario, waterways movement may be fostered with Guwahati as hub for upper Assam, Tripura and Mizoram in respect of both inward and outward traffic of North-East.

SCI Announces Launch Of IMS Service

DP World Chennai recently hosted the launch of IMS Service, India Myanmar Service by The Shipping Corporation of India which will link South & East India to Myanmar. This service has been envisaged and promoted actively by the Ministry of Shipping, Ministry of External Affairs, Ministry of Commerce, Government of India in line with the enhanced trade relationship with Myanmar. The service commenced with “m.v. SCI Kamal”, a 1,200 TEU capacity vessel arriving in Chennai on her maiden call and to commemorate the launch event, a gala function was organized on 3rd October 2014 with delegates from Ministry of Shipping, Chennai Port

Trust, The Shipping Corporation of India , DP World Chennai and leading luminaries from the local trade and shipping fraternity participating in the launch function. “m.v. SCI Kamal” on her maiden call at Chennai carried out a throughput exchange of 200 TEU’s with imports comprising commodities like pulses, timber, furniture etc. & exports comprising cement, general cargo & chemicals. The flagging off of the service took place in Chennai on 03.10.2014 and the new service is scheduled to call at Chennai every fortnight and operate on the following port rotation: Chennai > Krishnapatnam > Yangoon > Colombo > Chennai. Dr. Vishwapati Trivedi, Secretary, Ministry of Shipping remarked that the launch of the India – Myanmar Service was a direct offshoot of the Government’s ‘Look East Policy’ by using northern Myanmar to reach in to Mizoram and other North-Eastern States using the Sittwe port in Myanmar, on the Bay of Bengal, situated at the mouth of the Kaladan River. He further commented “SCI has the wherewithal to sustain the service in the long run. We cannot expect to make profits from day one. However, in a year’s time, we expect the service will be well received by the trade”.

LOGISTICS TIMES October 2014

NEWS BRIEFS

Safeducate signs MoU with Tata Institute of Social Sciences

Safeducate, India’s premier supply chain & logistics skilling firm and a part of Safexpress Group, has signed a Memorandum of Understanding (MoU) with Tata institute of Social Sciences (TISS). This remarkable tie-up which took place on the 25th of September will help create skilled workforce in the manpower intensive supply chain & logistics industry. Safeducate has now become the Skill Knowledge Partner (SKP) of TISS and will drive the supply chain skilling revolution in India. The MoU was signed by Divya Jain, CEO, Safeducate in the presence of TISS Director, Prof. S Parasuraman and Dy. Director, Prof. Neela Dabir. Speaking on the occasion, Divya Jain said, “Safeducate has been in the field of training and skilling for over seven years now. This partnership with one of India’s

foremost education center will help us get supply chain education to a coveted position, as well as create courses that are not just market driven but also aspirational for students. We look forward to a brighter career for aspirants in this field by way of a robust vocational education system.” TISS Director, Prof. S Parasuraman remarked, “Vocational courses have been designed with a definite vision to improve the lives of disadvantaged and marginalised youth, especially those who are excluded by the formal school education system. TISS SVE (School of Vocational Education) has been set up to create an ecosystem that would bring back the dignity of labour for blue-collar streams of work and create a sustainable source of income for them.” Divya Jain explained further, “As a Vertical Anchor (VA) for supply chain & logistics industry, Safeducate will be responsible for an array of activities with respect to this program. These include conducting skill gap mapping of logistics industry, collaborating with industry associations and players to study future skill demands & trends, as well as designing the course pedagogy, syllabus and course content for all the skill programs. We will also be responsible for identification of training companies for facilitation of referred programs panIndia, tie-ups with industry players for on-job-practical training, and mentoring of training companies and skill development centers all across India.”

Air cargo leaders call for collaboration The air cargo industry must work closely with regulators to deliver safe, reliable, efficient global trade, delegates at The International Air Cargo Association (TIACA)’s Air Cargo Forum (ACF) held early this month in Seoul were told by the captains of the industry. TIACA took to the stage with the International Civil Aviation Organization (ICAO) and the World Customs Organization (WCO) to pledge closer collaboration at the opening session of the three-day Forum and Exposition. “The industry is facing unprecedented challenges and unprecedented opportunities, we must face them together,” said Oliver Evans, TIACA Chairman. “Collaboration is key. It is a long road, but it is an exciting one and one we can be proud of.” Evans was joined by WCO Secretary General Kunio Mikuriya and ICAO Secretary General Raymond Benjamin at the plenary session, the first of eleven workshops and panels covering issues from advance LOGISTICS TIMES October 2014

data to security and training. “Airtrade is an essential enabler of global connectivity, but we need to forge practical partnerships and solutions, ” Benjamin told delegates. Mikuriya and Benjamin met with the TIACA Board as part of continued collaboration between the organizations. “Getting information at an early stage, preferably preloading, is vital to deciding what approach is needed to high-risk cargo,” said Mikuriya. “That is why we have started working closely with the industry and ICAO and we are trying to find synergies to avoid duplication between supply chain partners.” The conference was opened with a speech by SUH Seoung-hwan, Minister of Land, Infrastructure & Transport, Korea, and a welcome from Wan-su PARK, the newly appointed president and chairman of ACF host Incheon Airport.

NEWS BRIEFS

UPS Pain in the (Supply) Chain Healthcare Survey

This yearâ&#x20AC;&#x2122;s UPS Pain in the Chain survey reveals a correlation between a risk-informed approach and the rewards of global success. The survey points out that regulatory compliance , as expected, is the most common trend driving business across globe by 88% & supply chain changes, followed by product development specialization. In terms of future investment strategies, technology, global expansion and multi-channel distribution rank as top planned strategies for improving competitiveness and increasing efficiency again this year. The top four markets for global expansion remain the same as last year: China, the U.S., Brazil and India. Consistent to 2013, the top four countries healthcare firms plan to expand within 18 months are China, the US, Brazil, and India. This is more so for Medical Devices and Equipment manufacturers than the other sectors and US/Canadian firms.

74% healthcare firms currently have a strategy for serialization or UDI, though this is mostly driven by the Pharma sector and most commonly in the ISMEA 78% Capital expenditure, 80% time, 61% interoperability with current systems, and 70% integration with partner systems are common documentation history/ UDI challenges. These are most concerning in Pharma, and in ISMEA. Success in Addressing Supply Chain Issues is 58% in Regulatory compliance and 60% in product security in ISMEA. In the past 18 months there has been strategized 80% investment in new technologies and 78% tapping into new global markets to expand our customer base and the plan in the next 3-5 years is to expand Order management by 98% and Web ordering systems by 71%.

LOGISTICS TIMES October 2014

MARKET TRENDS

World rail supply market predicted to continue growing despite economic slowdown Despite low economic growth and public deficit problems in several important countries, the world rail supply industry steadily grew at approximately 1.5% per annum in the period from 2011 to 2013, according to the 2014 UNIFE World Rail Market Study released recently at InnoTrans. The study, conducted by Roland Berger Strategy Consultants and based on trends and future orders, expects the annual growth of the industry to increase to 2.7% per year over the next six years. Lutz Bertling, President of Bombardier Transportation and Chairman of UNIFE, announced the study at InnoTrans, stating, “The demand for rail products continues to be resilient in a difficult economy—the expected year over year growth of 2.7% until 2020 reflects the growing need for sustainable mobility. Global trends like an increasingly urbanised world population will create further needs for modern mobility solutions thus ensuring a long-term prosperous future for our industry.” The study details that the regional markets with the highest growth rates over the next six years are Latin America, Asia/Pacific, and NAFTA, this is driven by major investments in rail projects in Brazil, Colombia, China, and the U.S. The Africa/ Middle East region is expected to maintain its current high market level in the upcoming years. The LOGISTICS TIMES October 2014

total world market will amount to approximately €176 billion per year by 2017-2019. Philippe Citroën, Director General of UNIFE, commented, “European industry is still the predominant player in the global rail supply market, in fact, the manufacturing of rail supplies is one of the few sectors where Europe is still in a leadership position. We expect this trend to continue as the European industry continues to invest in innovation. I am confident that a number of initiatives being developed at EU level, like Shift2Rail, the Connecting Europe Facility and the adoption of the Fourth Railway Package, will give a further boost to the rail market in the near future.” The 2014 edition of the UNIFE World Rail Market Study is the fifth edition of the study which has been published biennially since 2006. The

study provides a comprehensive overview and key insights on all relevant developments in the rail supply market. This edition takes an especially deep dive into two global rail markets: the U.S. and Russia, to provide readers with a nuanced picture of these large absolute markets that are important growth areas for the broader industry. "Moreover, the study dedicates a section to alternative financing methods which will be of increased importance to rail industry players" states Andreas Schwilling, Partner of Roland Berger Strategy Consultants. "Reasons for this are the growing demand for rail systems along with scarce public funds as well as the increased efficiency induced by the private sector." The study is published by the DVV Media Group.

PERSPECTIVE

Key Issues for Logistics Growth Logistics has become a key word in todayâ&#x20AC;&#x2122;s economics and planning. Logistics entails a proper coordination of certain functions such as production, transportation, and inventory management, location of the plant, and information and communication technology for the purpose of ensuring the supply of the right product, at the right place, in the right condition, at the right price, and most importantly, at the right time. Logistics in India is in its developmental stage. India spends 13% of its GDP on Logistics as against 8-10% by other developed nations. Logistics costs including inventory, transportation, warehousing, packaging and administration costs, are very high, much needs to be done in this direction. There is need to come up with an Integrated Logistics Policy for efficiently managing and controlling the flow of goods and services in India. Several global third party logistics (3PL) providers have already made their ingress in India and have set up operations and services with an aim to becoming big game players in the future. Thus, there is need for creation of a vast range of supply chain management (SCM) and logistics solutions covering several factors such as warehousing and material handling, cold chain management, e-commerce, inventory management, information technology, training of manpower, etc. for improving the efficiency and productivity of the complete value chain in terms of profits, speed and customer satisfaction. The Indian logistical market players should gear up to face the global challenge. Some characteristics of the Indian Supply Chain that need ATTENTION. The Indian logistics sector LOGISTICS TIMES October 2014

Dr. Veni Mathur Ex-faculty, IIT, Delhi Dean, Million Minds

clearly needs to focus on reducing transportation costs that are high due to regional concentration of manufacturing and geographically diversified activities as well as inefficiencies in the infrastructure and related technology. Freight movement in India is shifting from rail to road that has implications on quality of transfer, timeliness of delivery, costs as well as congestion and pollution. The road transportation industry is fragmented and unorganized. This segment comprises owners and employees with inadequate skills, perspectives and abilities to organize or manage their operations effectively. Low level of technology, low wages, poor maintenance of equipment, overloading of trucks beyond capacity and price competition amongst a large number of service providers in the industry are some of the ills plaguing these players. Logistics costs are also increasing in India due to the dramatic growth in several sectors like steel, pharmaceuticals, food and agrobusiness, and auto. Investments in cold chains and losses in warehousing and packaging might also be the causes of high costs. Erratic power supply has caused low dependence on technology and more on manual handling and has hampered productivity as well

as service quality. A very small percentage of the firms use any software for scheduling dispatches. In addition, some firms claim to have more than 500 suppliers. This is perhaps where the difficulties in managing logistics in India lie - larger the number of suppliers or distributors, higher is the cost of coordination. As the â&#x20AC;&#x2DC;octroi taxâ&#x20AC;&#x2122; is very high and warehouses are located outside city limits, the operating costs are high. The ability to provide quick response to customer requirements is reduced due to location policies of the past, where manufactures were forced to locate plants away from each other. The increase in consumer awareness in India has caused the rise in demand and eventual growth in international trade. Therefore, improvement of infrastructure support in terms of roads, rail, ports, warehouses and uninterrupted power-supply hold the key to the success of the economy. The National Transport Development Policy Committee is set up to provide a framework for transport growth till 2030, involving pricing and coordination between alternative modes of transport. The point to notice is that with modes of transportation come other logistics services like warehousing, inventory control, IT, operations, finance, 3PL/4PL, production, marketing, customer care, etc which also need attention at the same time. There is need for creating an Integrated Logistics Policy to take care of all these issues simultaneously, to ensure efficiency and reduce cost. The key issues that need to be incorporated in the policy should be: 1. Shift of cargo movement from road back to rail by accelerating the pace of DFC. 2. Strengthening of Coastal shipping for the movement of

freight traffic, 3. More focus on Inland Water Transport 4. Completion of construction of National Highways 5. Ensuring the Last Mile Connectivity 6. Developing a robust Cold Chain System. 7. Building of Multi-modal Logistics Parks 8. A system of road maintenance programmes on a continual basis. 9. Building a talent pool to look after all the operations efficiently â&#x20AC;&#x201C; 10. Better standardization and up-grade of technology. 11. Use of IT in logistics 12. Sustained liberalization of the trade policy 13. Sustained liberalization of foreign investment 14. Developing infrastructure. To meet the demands generated by industrial growth. 15. Promoting Public Private Partnerships 16. Rationalizing the taxation policies, procedures, 17. Granting industry status to Logistics sector The above mentioned scenario poses an immense logistics challenge to - building the infrastructure, changing the industrial policies to facilitate the production and movement of goods and services, deployment of effective managerial practices and technology to enhance the competitiveness through better management of logistics networks and developing new models for the services sector as well as agriculture. The interplay of transportation, technology and value added services will improve customer satisfaction as well as bring the cost down

and increase efficiency. Changing government policies in terms of taxation, and regulation of service providers will play an important role. Coordination between various government agencies will pave the way for growth in multi-modalism. Logistics industry in India should be able to develop integrated business models and at the same time do

away with the existing policy based on rigidities. All these efforts will be a boon to the logistics business in India. Without these in place, in letter and, more importantly, in spirit, we are doomed to mediocrity and underutilization of the potential that exists; a potential that can easily be ours to conquer!

LOGISTICS TIMES October 2014

MARKET TRENDS

ICRA: Cargo growth continues to remain sluggish

In FY14, total cargo handled at Indian ports increased by 4.3% to 976 million tonnes from 935 million tonnes during FY13. The growth was pegged down by sluggish cargo performance at the major ports which registered a meagre 1.8% growth in cargo volumes to 556 million tonnes in FY14. Non major ports on the other hand exceeded the overall growth rate by recording an 8.3% growth in throughput on a yoy basis to 420 million tonnes. While the growth was meagre, on a positive note the major ports arrested the decline in cargo volumes to register the first increase in yoy cargo throughput since FY11. During the first four months of FY15, the cargo LOGISTICS TIMES October 2014

throughput at major ports has registered a modest 3.3% growth over the corresponding period of previous year. According to K. Ravichandran, Senior Vice-President and CoHead, Corporate Ratings, ICRA, “The growth at major ports during FY14 was pegged down by a further decline in iron-ore cargo volumes following mining restrictions in major states like Karnataka; Goa and Orissa and other policy related uncertainties like imposition of export duty. Lower container and fertilizer volumes also pegged down growth at major ports. These declines were offset by healthy growth in coal imports, which along with stable volumes in other bulk

cargoes (solid and liquid) supported the modest growth registered. In terms of market share, non major ports continue to increase their market share – to about 43% of total cargo in FY14 as against 42% in FY13. The consistently superior performance of the non major ports (cargo share has increased significantly from 29% over FY 07FY 14) may be attributed to their better cargo handling infrastructure and facilities vis-à-vis the major ports; more diversified cargo mix and presence of group captive cargo in some cases.” ICRA Research notes that the growth during the first four months of FY15, was supported by an increase in all cargoes except POL

(-0.5%) and Iron Ore (-7.5%), at all ports. Coal volume growth however, remained significantly lower than overall growth in FY 14 at 1.1%, while other cargo, Containers and FRM registered growth of 10.8%, 5.33% and 24.7% respectively. At JNPT and Chennai (which handle the majority of the container cargo at major ports) the increase in container volumes was moderate, with 4.8% and 4.2% increase in volumes respectively. New Mangalore (-3.7%) and Kolkata (-6.9%) reported volume decline during the period, while Mormugao (26.8%), Kamarajar (Ennore, 16.7%) and Tuticorin (11.7%) reported the highest cargo growth rates. Comparatively lower coal volumes compared to previous quarters, affected the volumes of major bulk handling ports like Paradip, New Mangalore, Vizag and Haldia (Kolkata). The 2014-15 budget provides a thrust on reviving investments in the port sector, with a significant increase in outlay on setting up of greenfield ports, development of SEZs at existing ports, setting up of a single window for custom clearance, etc. With respect to these new announcements, Mr. K Ravichandran mentioned “ICRA Research notes that the budget, proposes to set up an institutional body – ‘3P India’, which could address some of the obstacles faced by port developers operating through the PPP route and support the developers in obtaining regulatory approvals and speedy resolution of pending issues. Along with the constitution of this institution, the proposed large investments in the sector on new capacity additions, recent guidelines by MoS on Land Policy for Major Ports, plans for establishing a mechanism to re-negotiate terms of the PPP projects as well as to redefine the role of the port tariff

In FY14, total cargo handled at Indian ports increased by 4.3% to 976 million tonnes from 935 million tonnes during FY13. The growth was pegged down by sluggish cargo performance at the major ports which registered a meagre 1.8% growth in cargo volumes to 556 million tonnes in FY14. regulator and to deregulate tariff setting at the 12 major ports, are all expected to provide major impetus to growth in the sector and could boost trade movement at Indian ports in the long term.” ICRA Research notes that the cargo growth outlook for the Indian port sector continues to be strong over the medium to long term driven by the domestic requirements of coal, for power and other sectors; crude oil, for meeting domestic petroleum requirements; and containers, given the cost and logistical advantages associated with containerization. Some near term uncertainty

may, however, be associated with particular cargo categories like imported coal, due to uncertainties plaguing the power sector and persisting delays in execution of greenfield power projects; iron ore, due to unresolved policy issues; and containers, due to the weak global environment affecting exim trade. Further, the resolution of the ongoing tariff policy related discussions to bring clarity on the tariffs going forward as well as actual materialization of projects awarded by the MoS would be crucial for the long term cargo growth prospects at the major ports. LOGISTICS TIMES October 2014

COVER STORY

Transport Infra 2.0: Call for Convergence

LOGISTICS TIMES October 2014

The new government has sent the message loud and clear that while it wants to put the economy back on track expeditiously, it will pursue the grand vision of making India a global manufacturing hub in the medium to long run - something that has remained an unfinished business for quite long. This obviously entails a certain rejig in transport infrastructure in terms of capacity addition. But as analysts and stakeholders opine, infrastructre development in future would need a new approach wherein there should be clear focus to facilitate all four modes complementing each other. Simply put, the exercise has to be more qualitative in nature. FICCIâ&#x20AC;&#x2122;s annual India Infrastructure Summit held last month in Delhi saw serious deliberations on the critical issue of integrated infrastructure planning and while analysts emphasized on the imperative nature of this task, they also pointed out the existing structural and procedural bottlenecks which need to be removed urgently. Ritwik Sinha reports... LOGISTICS TIMES October 2014

COVER STORY

ew government, new promises and new enthusiasm… This could well be dubbed as the defining mood of India Inc today. After nearly two years of consistent growth decline, there are preliminary green shoots to suggest that a reversal has begun. And the real comfort comes from several pronouncements made by the new government underlining that no stone would be left unturned to push the economy in the coveted dynamic growth territory. The prime minister’s high-pitched call for ‘ Make in India’ has come as a dynamo in sentiment terms at least assuring India Inc that this government is serious to pursue that unfinished business – of making India a manufacturing powerhouse. However, considering the mammoth task ahead which this vision underlines, putting economy back on high-growth trajectory in the medium run and converting India into a manufacturing hub in the medium to long run would certainly need consolidating LOGISTICS TIMES October 2014

economy’s pillar of growth. From the freight perspective, it would mean revitalizing the transport infrastructure sector. With the logistics cost being too high vis-a-vis developed and other emerging markets, the task of adding manufacturing prowess to Indian economy’s profile would be incomplete and this would need transport infra to be taken to the next level. FICCI’s India Infrastructure Summit held on 23rd September in the national which saw participation of senior government representatives and the captains of the industry saw serious deliberations on the issue and the key takeaway of the day was: infrastructure transformation would need gear shifting of a serious kind with more focus on the convergence of its components both in the inter and intra sense. And among other things, this also means weeding out the procedural bottlenecks which have become more of a norm than unfortunate irritants in some select cases.

The Current Situation The real issue today is that of

India losing steam in infrastructure development in last few years, especially after 2010. The disquieting fact is: slowdown syndrome has not only been shaped by falling investment but also the ongoing projects getting mired in inordinate delays. According to an estimate, about 215 projects worth Rs 7,00,000 crore are finding it difficult to each to the finishing line because of some reason and the other. And this has made infrastructure related troubles more pinching in nature. The India Transport Report published by the government early this year adequately sums up the major pain points in these words, “Ports do not always have infrastructure for evacuation of goods; rail networks do not link with road networks for last mile delivery of goods; bus and metro systems in urban areas do not always exchange people. Highways built by one level of government are not always linked to district roads built and maintained by another. The lack of an institutionalized arena or even professional context for examining the interaction between investment

If you have the money go for engineering, procurement and construction (EPC) contracts or else build roads through the PPP mode. - Dr. Vishwapati Trivedi Secretary, Ministry of Shipping

and maintenance of the physical infrastructure; regulation of access; and policies affecting operators in shaping the supply of transport options also dulls the system’s incentives and ability to respond to demand.” Needless to say the above-mentioned

facts, among other things, also ensure that the logistics cost in India remain in high trajectory and this, as several stakeholders opine, makes it imperative that future bids for capacity escalation should also have the convergence ingredient between all critical transport

infra components. A recent report prepared by Ernst & Young titled ‘India’s Transport Sector: Convergence & Connectivity’ pitches for the task in these words, “ According to the World Bank, logistics cost in India is 14 percent of the total value of goods vs China at LOGISTICS TIMES October 2014

COVER STORY

No study has ever been done, not even by the Planning Commission, on the optimal road grid required. Basic decisions on these aspects are not taken with care and the tendency is to go on declaring roads as national highways. - R P Singh Chairman, NHAI

10 percent and developed economiesâ&#x20AC;&#x2122; average of 6-8 percent. With such cost differential in transportation, the cost of doing business will remain high in India, impacting profitability and has the potential to dampen business confidence in the long-term as other economies evolve into an integrated transport system. According to the European Business & Technology Centre (EBTC), a weak logistics LOGISTICS TIMES October 2014

infrastructure costs our economy $45 billion annually (with higher facilitation, inventory holding and damage accounting for a large part of these costs). Further, as global integration of logistics is increasingly crucial towards enabling trade flows between countries, especially between developed and emerging nations, India runs the risk of losing out on competitiveness vs emerging peers such as China,

Brazil, Vietnam and Indonesia among others. India has steadily fallen behind international peers in terms of logistics convenience, slipping from 46th in the world in 2010 to 54th in 2014.â&#x20AC;? That reducing logistics cost is an urgent issue now is something which all stakeholders are voicing today. Said Dr. Didar Singh, Secretary General, FICCI, â&#x20AC;&#x153;If we want our economy to take off, two things are required.

COVER STORY

If we want our economy to take off, two things are required. Firstly, we should improve our ranking in the ‘ease of doing business’ list. And then convergence of infrastructure is a must. It will bring down the cost of doing business by 10-12 percent. - Dr. A Didar Singh Secretary General, FICCI

Firstly, we should improve our ranking in the ‘ease of doing business’ list. And then convergence of infrastructure is a must. It will bring down the cost of doing business by 10-12 percent.” According to Adil Zaidi, Director, LOGISTICS TIMES October 2014

Ernst & Young, the writing is clearly on the wall that future infrastructure planning should not skip the convergence issue. “Convergence of infrastructure is the way ahead. We need to develop integrated planning,

connect missing links, ensure that infra assets complement and not compete and finally seek the reduction in logistics cost.”

Doing

away

with

structural bottlenecks But any attempt to reduce logistics cost via convergence between transport infra components would not be possible without doing away with the existing structural bottlenecks which unfortunately have become the defining element of a lethargic system in last couple of years. R P Singh, Chairman, National Highways Authority of India (NHAI) launched a scathing attack on all stakeholders saying that the convenience of calling

PPP projects. A major problem, he said, was with interpretation of the Model Concession Agreement (MCA). The bureaucracy has the tendency to look for government-centric interpretation of the clauses in the MCA to the detriment of the private sector. It must be borne in mind that a contract if for 30 years and needs constant interpretation and stability. He added that the PPP mode is preferred wherever money is scarce or not available. The biggest problem,

the port sector some projects have gone awry because of the interest of developers wanting the projects in a certain way. There were cases in dispute resolution where the arbitrators have completely reversed the revenuesharing document against the interests of the developers, he added. And then there are procedural gaps which many market players believe should be plugged as soon as possible. Julian Michael Bevis, Senior Director (South Asia), AP Moller Maersk drew

everything as the failure of PPP (public private partnership) formula is erroneous. “The infrastructure situation in the country is dismal; the pace of investment is sub-optimal and unless we come out of the subsidy regime and inject substantially more funds into capital expenditure for asset creation, the situation will not look up.” Much of the problem on PPP projects, he said, was caused by aggressive bidding for projects, misguided as the developers are by professionals and there is tendency to pass on the risk to the government when the project become unviable. According to him, the solution lies in total transparency in

he said, was the selection of project. “No study has ever been done, not even by the Planning Commission, on the optimal road grid required. Basic decisions on these aspects are not taken with care and the tendency is to go on declaring roads as national highways”, he said. Dr. Vishwapati Trivedi, Secretary, Ministry of Shipping too strongly emphasized that PPP by itself was not a bad concept. “If you have the money go for engineering, procurement and construction (EPC) contracts or else build roads through the PPP mode,” he said. As regards interpretation of the MCA document, he said, even in

attention to the procedural issues in the port sector in these words, “Logistics and transportation is the key for this country’s growth. But I don’t think, many understand it. What is clearly lacking here is a team effort. Same rule is interpreted differently by custom authorities at different ports. And it creates confusion. We certainly need standardization in customs rule. We also need to refrain from running to the regulator for every small issue. Something should be left for the market forces to decide. On the physical infrastructure side, we need ports with the capacity to host large vessels. Ports which can’t handle large ships LOGISTICS TIMES October 2014

COVER STORY

can’t grow beyond a certain point,” he pointed out (see his interview on page 33).

Funding Options Among other things, the success of future infrastructure development in the country on desirable lines would certainly be a function of finding new funding options. “Money is not an issue. Everybody in the infrastructure sector wants long-term finance. 45 percent of funds is contributed by the commercial banks usually for a period of 7-8 years. Its not enough for large infrastructure projects,” Dr. E S Rao, Chief General Manager, IIFCL emphasized. According to Sidharth Kapur, President & Chief Financial Officer- Airports, GMR Group the industry can’t rely much on External Commercial Borrowing (ECB) route since it contributes only 4.4 percent of total borrowing but alternative routes can be accessed which includes getting the funds from the insurance sector. “Asset Under Management (AUM) of insurance companies has grown at a CAGR of 16.3 percent in the recent years in the country while investments in infrastructure has grown by only 1.25 percent,” he pointed out. Many analysts participating in the event strongly expressed this opinion that deepening of debt market is probably an effective panacea – something that has been picking up in the country but not at the desirable pace. “India needs to deepen the bond markets as a viable mode for infrastructure financing. We will need about Rs 26.4 lakh crore of investment in the infrastructure sector in next five years. Out of this, around Rs 18 lakh crore can be generated through debt instruments which are controlled by a select group of players. Therefore, we need to encourage foreign investments in rupee bond market. We also need to liberalise investment norms for pension funds and insurance companies,” Pawan Agarwal, Senior Director, CRISIL Rating opined. Anil Swarup, Additional Secretary, Cabinet Secretariat & Head of Project LOGISTICS TIMES October 2014

PM Narendra Modi’s grand vision of making India a manufacturing magnet entails an integrated approach in infrastructure development which, among other things, will also bring down logistics cost.

Monitoring Group, Government of India agreed that facilitating new financing options for infrastructure projects is serious challenge for the government. “The government well realizes that if new options are not found for infrastructure funding, it could be very detrimental,” he said. The writing is clearly on the wall. Enthusiasm and positive sentiments apart, the key to critical changes in the infrastructure sector would be a function of careful planning and unflinching commitment on the implementation front. Ernst & Young report on Transport Infra Convergence presents a list of recommendations which includes: award only adequately planned project, development of

web enabled integrated database (for capturing all the traffic data), single window clearance, attract long-term financiers, prudent allocation of funds for maintenance, long-term plan for developing capacities, promoting quality based selection (least cost based selection should be avoided), agreement on base case financial model and its regulator update for future renegotiation, delinking road traffic risk with construction and maintenance, integrated development of ports, clear and implementable PPP policy for Railways, etc. Quite a list one would say on infrastructure development front but when the intention is to take the country’s economy to the next level, the task could hardly be a cakewalk.

LOGISTICS TIMES October 2014

INTERVIEW

No doubt, Potential is limitless

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INTERVIEW

Julian Michael Bevis, Senior Director (Group Relations)South Asia, AP Moller Maersk is serving his second stint in India and has watched infrastructure developments in the country from close quarters. He was one of the key speakers at FICCI’s India Infrastructure Summit where he minced no words in highlighting the procedural bottlenecks in the port sector. In an exclusive conversation with editor Ritwik Sinha, Bevis talked about the nature of transformation which Indian port sector needs on an urgent basis. Edited excerpts: This is your second spell in India. Your first spell had lasted between 1996- 2008 and the present stint began about a year ago. Tell me from your experience, do you notice any change in the port driven processes which are being pursued here. Have you noticed any significant upgradation? The general perception is that our port infrastructure leaves much to be desired. There is no doubt that a huge amount of change has taken place. I can go back to what situation was in 1996-97 when I first arrived and even when I left in 2008, some major developments had taken place in terms of infrastructure improvement. The economy was growing at over 8-9 percent around that time and some sectors were growing at a much robust rate. I came back in this country in September last year and I am happy to see that the process of infrastructure development has continued here. There are visible positive changes in terms of airports, new roads, more rail capacity, etc. If I specifically talk LOGISTICS TIMES October 2014

about ports, then there are more ports which have emerged on the horizon which have given exporters and importers more choices. Obviously some people would point to the fact that the economy has slowed down. But then it’s all part of the game. Every growing economy has to go through periods of adjustments to facilitate longterm structured growth. And infrastructure needs to continue growing to support that. I would just like to draw your attention to one specific comment which you made at FICCI’s infrastructure summit. You said, “ reducing logistics and transportation cost is key to an economy’s growth. But I don’t think many people here understand that.” Please elaborate this assumption. I didn’t say it is the key. I said it is one of the important factors. The point is very simple: in this age and day, all goods have to be transported over short or long distances, domestic or international. Therefore, supply chains constitute an increasingly important part

of any economy and India is no exception. I think, there are evolved parts in this economy where this thinking is well recognized. But at the same time, there are players or stakeholders which are yet to rise to this realization. But obviously this is an important factor for an economy of this size with so many different issues. It’s simply inevitable that the industry holds proper dialogue with governmental agencies and regulators to actually make everybody understand exactly what’s going on. From your statement I got the impression as if you are saying that every stakeholder is in a state of confusion. Please correct me if this impression is wrong. I am certainly not saying that they are in a state of confusion. The point is in a growing economy every sector is dependent on another and that’s a complicated thing to manage. If an economy has to continue growing then every sector including those in logistics and supply chain have to ensure they are communicating well with each other. And inevitably

that does not sometime work the way it should. But that’s not to say that people are confused or they are deliberately not managing the things properly. It’s simply a reflection of the fact that there are so many things going on and time is limited that sometimes one rather forgets if things are going to work properly. One has to ensure if the other guy really understands where you are and what you are doing and what your issues are. Some of these issues are quite complicated and it takes time to communicate them. If you take current situation with imports of containers, there are delays in the movement of containers and bulk cargo from

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Of course, it is. And I think there are a whole lot of issues to be resolved between customs and the exporters/importers to ensure that the former get the right balance in the application of the rules. The custom machinery in any jurisdiction is to protect the economy and collect the revenue. When I say protect the economy it means implementing tariff barriers the government of the day wishes to impose. They have to do that by achieving the right balance between the protection they are supposed to ensure and generate the revenue and the costs it incurs to the economy in the application of the rules. I think in this country it’s probably fair to

Once the market really starts to operate effectively, then you don’t really need regulations which are there. In my opinion, market forces are probably the most effective regulated regime. It is my submission that our policy objective should be directed to allow market forces regulation rather than some departments. the coast to the inlands. There are a host of reasons and those reasons need to be understood and communicated across the board by all stakeholders. But sometimes that’s not happening properly. I will specifically draw your attention to one point you very pointedly emphasized in your FICCI speech - different interpretation of the same law by custom officials at different ports. You cited it as a major issue in doing business.

say that in some areas that balance swung too far in one direction and it has become far too complicated. That is why I said in that discussion at FICCI, some custom rules are not applied uniformly across the country and that’s make it difficult to do business. It is a fact that in terms of ease of doing business, India does not score as highly as it should. Being at 134 rank in a list of 155 countries in the list of ‘ Ease of Doing Business’ is not the place where you should be.

But all said and done, there have been serious attempts in the past decade to improve physical infrastructure. But is it enough given the kind of growth projections we have for the future ? Without doubt. What I notice now and what was there when I had first come to India in mid-90’s, there has been a substantial change. But it isn’t enough. We need to have more for three reasons – you need to have adequate capacity to move the cargo. If you don’t then there is a blockage and there is an adverse economic effect. The second reason is, the importers and exporters need more options. And that would mean the service providers starting to compete and the ports start to compete. That would make markets more effective and it would start to force prices down. So the third point in building infrastructure is: we want to build capacity to give people more choice. But ultimately it is to enable markets to work. Once the market really starts to operate effectively, then you don’t really need regulations which are there. In my opinion, market forces are probably the most effective regulated regime. It is my submission that our policy objective should be directed to allow market forces regulation rather than some departments. Some minor ports have begun to make their presence felt in India. They are showing more robust growth trajectory (of course, on a low base). Do you look at it as major positive development? This indeed is a positive signal because it is adding capacity where it is needed and it is giving choice to exporters and importers. Take the example of Delhi market – exporters/importers rooted here now can choose between Pipavav, Mundra or all existing terminals LOGISTICS TIMES October 2014

INTERVIEW

in Nava Sheva area. This is good because it creates competition provided the links between here and those ports facilitate adequate capacity. Major ports may not be enthusiastic with this trend because it is competition. But you don’t need competition by regulation and try to restrain the other players. You need to become competitive by providing better service. That’s what a market is all about and that’s how it should work. In my opinion, the response of some major ports to this new trend is positive and they are ready to compete. But to compete you need restraints like tariff authority to be taken away. That is not to say that tariff authority was the wrong thing to do. When it was brought in place, it was a right initiative because there wasn’t any effective market. In such a situation, you impose a regulator who controls the market till the time the market has developed. And then the regulator progressively starts to take a step back. And leaves the price trends to be determined by the market forces. You are a global major in shipping and you are operating in zones where you have the support of the best physical infrastructure system and you also operate in emerging markets like India where the physical infrastructure in a transition mode with delays and congestion still being the defining features of the operations. What kind of adjustments you have to make to deal with this kind of ecosystem? I would repeat when I say that no market stands still. And so we have seen quite an improvement in the Indian infrastructure set up in last 15 years. The availability of port infrastructure has considerably improved. But to answer to your question, if you are operating in LOGISTICS TIMES October 2014

a market where infrastructure is constrained it means the costs go up because of factors - you may not be able to bring bigger ships which you are capable of or the cargo handling equipments may not be advanced, etc. And therefore the flexibility in your pricing and the efficiency with which you can deliver goods – be it working as a freight forwarder, container terminal operator or a shipping line- are not as great as in other areas where infrastructure work more efficiently. But this does not mean you will hang your towel. This situation warrants that you talk with government and the concerned departments to find ways to make the most of the

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were not available earlier. Over the years, we have also developed a base to connect to many robust inland locations which was not the case 10-15 years ago. Now markets in places like Indore, Varanasi and Bengaluru are growing very swiftly. And it becomes incumbent on us to provide services to importers and exporters in these locations. I have no doubt that going ahead you will find us looking at CFS operations in locations other than Delhi and Nava Sheva. And that process will continue as inland markets further develop. 8. In terms of volumes handled, does India figure in

If you are operating in a market where infrastructure is constrained it means the costs go up because of factors - you may not be able to bring bigger ships which you are capable of or the cargo handling equipments may not be advanced, etc available infrastructure and other resources. We very much want to work as partners to try and develop solutions to make infrastructure work much better. That’s what logistics partners are all about and that’s what we are always trying to do. This has been the cornerstone of our approach in India and we have been fairly successful in responding to the rising demand situation by putting up more capacity. We are serving more ports today than what we used to when I was here during my first spell. Today, we have calls in Mundra, Pipavav, Hazira, Nava Sheva, Cochin and Vizag and these are the places where our ship lining services

the list of your top five markets in Asia? I would like to think so. But its not an issue of the present ranking. The real question is that of potential which we believe is limitless. With a population of 1.25 billion people, with the penetration of the manufacturing sector which is comparatively low at this stage but the new emphasis can bring the things on the track, the potential of growth in container markets and other markets (bulk commodity)the potential of Indian economy is enormous and all signals suggest that the component of Indian international trade will grow significantly.

PERSPECTIVE

FIRE and ICE

In school, we learnt that the greatest boost to human evolution occurred when our ancestors learnt to manage fire. Domesticating fire for the purpose of cooking is considered the supreme causal factor for hastening the evolutionary development of homo-sapiens. Today, no human group eats all of its food raw. If we were to feed on only raw uncooked food, we would need to chew for more than 9 of our waking hours each day. Without fire, even if we had the chewing prowess of chimps, which delivers them a rate of 400 food calories an hour, after done gathering the food we would be chewing it for the rest of our waking hours. Either that, or an active brain of this size would not be sustained. Your brain, about 2% of body mass, uses 20% to 25% of the energy needed by your body at rest! Ancient humans grazed constantly to find enough calories to survive, similar to the way apes and gorillas do today. Raw food, by mass, does not contain that many calories and thanks to Fire, a shift to cooked food diet was possible, that allowed humans to pack more into their daily meals. Receiving the extra calories effectively allowed our ancestors to divert efforts from more mundane survival linked activities and kickstarted the grand civilization and the myriad cultures we are today. Research also highlights another impact from being able to receive these extra calories - it allowed the human brain to evolve into a bigger and better powerhouse. the number of neurons in your brain and their daily working is largely dependent on the number of calories you can consume in a day and there are only that many hours in a day. LOGISTICS TIMES October 2014

Pawanexh Kohli CEO & Chief Advisor, NCCD

Around 900,000 years ago, fire was domesticated into our hearths, coinciding with a peak in glacial activity and global cooling, fire helping the genus Homo to survive. This was the period of our ancestor Homo Erectus, who evolved a better brain after learning the ability to cook food into a readily digestible format. The freeing up of calories from other foraging activities, released energy for the brain to develop faster. Fire therefore, delivered us from the laborious and time consuming task of digesting raw food, unshackling us for other sublime activities. Domesticating fire was indeed an epoch changing event, mutating nomadic tactics, allowing the human species to settle down, practice agriculture, develop pots and pans and weapons, to move into more scientific pursuits and some others whimsical. Fire symbolised power and epitomized control, with all ancient cultures having a fire-god empowered with this force! Fire and controlling its power has been always admired and our sciences have evolved largely around tapping

this source of energy. In most mythologies, fire is said to have been stolen from the gods. In Greek mythology, Prometheus a Titan, did the forbidden and stole fire from the gods and shared it with humans, thereby incurring the divine wrath of Zeus (king of gods) who chained him to have birds feed on his liver eternally. In Indian mythology, the Rig Veda tells of Matarisvan, the individual responsible for bringing forth the knowledge of production of fire by friction; Agni (fire) had gone into hiding and was rekindled from afar by Matarisvan, who in turn earned the respect and praise of both the gods and mankind. Even in folklore, whether the person was revered or punished for sharing such knowledge, the domestication of fire at the hands of humankind was considered a significant turning point. Most of recent industrialisation and the powerful machines we use, depend on from some fiery form of energy. But fire has not always been beneficial and misuse of its destructive force is well known. Control of Fire also brought about most of modern day ills â&#x20AC;&#x201C; higher population growth from more assured food options, sedentary lives and a comfort zone beyond naturally sustainable means. Even the discomfort of cold is now countered with artificially generated heat. Civilization is at tipping point - our capacity to feed our numbers is a matter of increasing concern Nonsustainable population growth is a key impact. It took all of human history until around 1800 for world population to reach one billion, the second billion was achieved in only 130 years (1930), the third

billion in less than 30 years (1959), the fourth billion in 15 years (1974), and the fifth billion in only 13 years (1987) and 12 years more to reach six billion in 1999. In 1969, there were half as many people as there are now, 7.2 billion, this doubling happened in only 45 years. Our civilization has reached a point where our capacity to feed our own numbers is a serious matter of increasing concern. Science helped increase food production but all food is organic matter and most of it perishes before it can reach people. The science of delivering what we produce needs more… it needs harnessing the power of ICE. It has become imperative that mankind fully grasps and controls the power of ice, so that our species can continue to thrive and prosper. This is a new epoch, the age when both Fire & Ice must work together, where our evolution stands on the brink to take another leap forward. This is to surely be the age of “Fire & Ice” The process initiated a hundred or so years ago, with the advent of mechanical refrigeration & transport. Today, cold-chain or

the use of temperature regulated distribution based logistics, is a common phrase. The success of cold-chain depends on how well be are able to manipulate its effects and counter its negatives. Though Da-Vinci is recognised as the first to use a mechanical air cooler, historical records also indicate that the Indian subcontinent was the first location where evaporative cooling was used, a millennia ago. Even today, ~50% of evaporative cooling globally is used in India, with ~20% of global happening in USA. The majority of refrigeration today is based on the same key principal, that latent energy is released from a phase change that is forced upon a cooling or refrigerating fluid. This has not changed from that millennia ago, when first used in what was then India. Most of recent scientific research has since been directed to develop cheaper or more efficient refrigerants and of late for those that have a lesser impact on our environment. In physical terms, the counter to fire is ice... surprisingly, there are no

“ice gods” in mythology In recent decades, a few other refrigerating methods have also been developed and deployed. Thermo-electric cooling is the temperature differential achieved at an electrified junction of two different conductors. Also called the Peltier effect, it is used to create refrigerators with no circulating fluid or moving parts. Magnetic refrigeration utilises the magnetocaloric phenomena or adiabatic demagnetization wherein a temperature change is caused by exposing a material to a changing magnetic field. Very low temperatures <10°Kelvin or (minus) -263°C can be reached. Acoustic cooling is another technique, where sound waves are used to produce the cold. We are far from fully understanding and harnessing the cold. Conventionally, the cold was viewed as something to be kept at bay – maybe a reminiscent of ICE age fears. Though, it is now being recognised that to feed out populace, coldchain and similar allied sciences, is crucial for the future of mankind. LOGISTICS TIMES October 2014

HIGHWAY NOTES

Empty boxes on highways "You're nuts... You're crazy," blurted out Ulhas Ambegaonkar, CEO of www.truckbussale.com, when I asked him to step out on the Solapur-Pune Expressway and make a call to the control room, managed by the concessionaire - a Tata group company on a sunny August afternoon this year, from the roadside SOS emergency phone booth. The highly qualified IITian with software focus on transportation industry was unconvinced by my plea that many SOS boxes in emergencies erected on highways to help hapless victims - need not be only truck drivers, but anyone like you and I - are just empty boxes. There may be nothing inside. "Are you saying, these companies that have won multi-crore contracts to build, operate and transport (BOT) will be stingy enough to save a few thousand rupees by bluffing the general public and putting up empty SOS (Save Our Soul) boxes on highways?" thus went the Punebased friend and now co-ordinating KRK Foundation's western region activities. Once again, I requested him: What's your problem? Why can't you just get out of the car and check out. Proof of the pudding is in the eating. Reluctantly, Ulhas stepped out on the Poona-Solapur Expressway and bingo! - this SOS box turned out to be an empty one. Nothing inside. He was aghast. "Hey, what the hell is this? Nothing inside!" he shouted while our driver Nitin and I laughed out loud from inside the Innova, we were riding on a roadtrip from Nagpur to Pune covering a distance of 700 km via Latur over 3 days. His ire and outburst did not surprise me. I am used to such displays of LOGISTICS TIMES October 2014

Ramesh Kumar

indifference by fellow Indians. Road safety? Ha ha! "Tata company? Such lapses?" once again this Pune intellectual honcho screamed. Almost. "How did you guess this is one is empty," a curious Ulhas demanded. There are no answers. But this is not the first time, I had halted on highways and checked out across India over the past five years since 2010- during my sojourn in trucks on Indian highways - such supposed to be emergency boxes erected on highways to assist the aam janta plying these expressways/ tollways. No, I do not halt every single such Emergency Assistance boxes, but randomly step out to pick up phones and check whether such phones really exist and if so, do they actually work and if so, does someone at the other end respond quickly. "Don't National Highways Authority of India (NHAI), who give out such contracts do period checks?" asked my fellow traveler. They do. Am sure they also come across such blunders. Before one jumps to conclusions, let it be said that concessionaires do not check the operability of these emergency kits on a regular basis. That's the crux. Once on such a mission, plying on the National Highway 44 (Hyderabad to Bangaluru) in 2011 I

got out and found the box working fine and the response at the control room was quick. The operator, quickly alerted the emergency team on wheels which reached me in double quick time. It was much before sunrise and it was still dark. When they understood my motive in calling, they were perplexed. I was taken a tour of their control room facilities and treated to a hot cuppa. Returning to the 'Ulhas' episode, we decided to confront the plaza manager of Pune-Solapur Expressway and drove to his office. The man in charge, joined hardly a week before, called in the systems and maintenance officer to check the veracity of our complaint. Yes, they knew the SOS box pointed out by Ulhas indeed was empty due to theft by some unknown elements and such non-functional emergency boxes do exist across tollways due to a variety of variety of reasons. We were promised that this would be set right as early as possible. "Did you check out the other ones before you hit this one?" asked the maintenance official politely. Yes, we did and shared that they were functional. He flashed a 2000 watt smile, convinced that he was doing his duty. A fortnight later, I was returning from Hubli to Pune to catch my flight back home to Delhi on a rainy morning. This time, it was Kubera, my Kannida driver, who was chosen for this task. This stretch of Naitonal Highway No.4 was manned by equally reputed Ashoka group. We halted, Kubera stepped out and opened the yelllow SOS box mounted on a pole on the roadside. He did find a couple of coloured buttons wiht instructions written on how to use it. When he tried calling, there was no response. I was

watching from a distance. "Maybe, I am hard on hearing. Possibly someone is talking, but I can't hear. Sir, why don't you come and try?" Kubera requested. I walked up to the SOS box. Pressed the relevant key for control room. For a few seconds, the buzz went on and on. Then it switched to a pre-recorded voice message. I disconnected and tried again. None picked up the phone at the Control Room of Ashoka, the concessionaire. Next, I tried the Emergency Ambulance button. No response again. This kind of experience is nothing new. Am sure there are hundreds of such Expressway SOS Emergency phones are just empty boxes or they are not being attended to. But who is going to monitor and ensure they are attended to? The government? NHAI? They have to, but will they? I doubt. I was actually not in any emergency seeking their assistance either on the

Expressway SOS Emergency phones are just empty boxes or they are not being attended to. But who is going to monitor and ensure they are attended to? The government? NHAI? They have to, but will they? I doubt. Pune Solapur Expressway, managed by the Tata group or on the National highway 4, manned by Ashoka. What if, I was really needing quick assistance and this was the status of such emergency boxes? I leave it there. Road safety is attracting a lot of attention of late with the new amendment bill in the offing. Let's move beyond just legislating. What India needs - on any sphere - is actionable plan. Not

empty postings on Facebook or any social media but a hardcore focused and dedicated approach to ensure that lives are indeed precious - drivers and passengers - and such valuable resources are well taken care of. Further down on the same highway towards Pune, Kubera asked: "Sir, there is another box. Can we try?" I smiled and requested him not to halt and check. What if, ..... you know the rest!

The writer is the author of 10,000 KM on Indian Highways, Naked Banana! and An Affair With Indian Highways. He also runs KRK Foundation, a registered Trust, focused on improving the working and living conditions of truck drivers and their families living in remote villages of India. He is reachable at ramesh@krkfoundation.org LOGISTICS TIMES October 2014

TRANSPORT MANAGEMENT

On the Road to Better Transportation being fearful. Let us get on to the stick and For 95% of the companies, globally, transport divide solution in two categories: management is neither science nor art; it is an a. Things that we can directly control oxymoron! (immediate). However, in our country, transportation b. Things that we can engage in to get of any form (primary or secondary) rarely desired result (long term). results from systematic and structured study, a. Things that we can directly control i.e, science or application of creative skill and (Immediate). boundless thoughts, i.e., arts.  To ensure we are getting 100% ROI It is mostly a function of low cost and Amit Kumar from vehicle taken or carriage space bought, rounds of haggling. While buyers are happy Supply Chain Re-think, Re-view & Re-plan your product for bargaining rock bottom prices what they Amway India mix – to use maximum volumetric space & forget to recognize is the increment in the risk transport mix – to ensure highest load ability. that comes with artificially decreased prices. Are you paying for transporting air space also? Is Transportation is not just about - one engine, one it appropriate to use milk run in long haul, some chassis and 6 wheels running 1000 kilometers, it is companies are experimenting that? Is that goes well much more than that. It carries our product which may with your model.Evaluate it. worth in excess of 5 million rupee and may be critical to reach destination on time in safe and sound condition.  Co-Opetetion: It is already evident in warehousing space where multiple competing companies are Regrettably, most of us choose to ignore that. hiring space in the same campus or vicinity that According to a world bank report, India is the second helps them in building and leveraging infrastructure cheapest market in road freight, cost per ton per advantages. Why we cannot replicate that in kilometer is around USD 0.028 or INR 1.75, principally transportation? Spend some time on it and do the because of unorganized nature of business. numbers. It is basically cooperating in backend and Another report reflects a piece of data- on ownership competing in front end. Ideate it. pattern of transport assets are very skewed - 77% of vehicle belong to operators owning 5 vehicle or less.  Use of multimodal/Rail: This can be another strategy, Rail infrastructure is coming up. However Characteristically, these fleet owners have less or no this is still not as per expectation in terms of services. access to technology and maintenance of their vehicle But the trend is catching up and increasingly many are inappropriate. companies are using it specially to connect north This is the moment of truth and let’s face it. When the to south (long haul) and inaccessible north east. transport assets are constrained at economy level and Explore it. carriage does not reaches on time, the problem will  Transport Management System: Please have spread to all (shippers,consignees and to consumers). it and in case you have it please update it. 90% of Let me explain how does it affect our usual business. corporates do not have it and they only depend on Today, well to wheel rates of diesel has gone to the stars transporter in route planning (who in case of part and sun, diesel to freight component is as high as 50-55 load does multiple transshipment). If we can derive % (ideal bracket is between 27-33%) (It means for a lane efficiency from WMS why not from TMS.Implement - if the freight is Rs.20,000, diesel that transporter buys it. is for Rs.10-11,000 and then you have cost such as tyre, toll, , EMIs etc.) and this is when the crude oil rate is $  Collaborate with transporter: Evaluate periodically if transportation plan is executed as per plan. Trust 93.4 / barrel (Source: Wall Street Journal, Dated: 10th and treat transporter as a partner, ask them how they Sept. 2014). But what if the crude oil shoots up to $120 can help in reducing transit time and in bringing to $150/ barrel – what are your contingency plan ? down inventory level. Share your load planning with Keep that aside, Goldratt in his book “The Critical them so to ensure they too have visibility. Do it. Chain” says, “ A company’s supply chain system is as strong as its weakest link?” Is transport going to be your weakest link? You Decide. B. Things that we can engage in to get As a leader in logistics, you should be more vigilant desired result (long term). about “what can be detrimental to your value chain I had opportunity to be part of an association which has model and hence for your business.” recommended MORTH - Ministry of Road Transport Trust not me but Bill Gates of Microsoft, when he says &Highway on ways for leveraging road infrastructure “fear should guide you”. But you cannot just sit around and transport assets. Some of them he are: LOGISTICS TIMES October 2014

WAREHOUSE MANAGEMENT

Fuel Related Issue:

Transportation is not just about - one

 Efficiency of fuel: There are vehicle in the US and Europe engine, one chassis and 6 wheels giving double mileage than vehicle in India. Government of India running 1000 kilometers, it is much should encourage commercial more than that. It carries our product vehicle manufacturer to invest in Research & Development as in which may be worth in excess of 5 how to extract extra kms from million rupee and may be critical to each liter.  Use of alternate fuel:Can there reach destination on time in safe and be any alternate fuel to run our trucks?Can we use CNG which sound condition. Regrettably, most of is widely used in buses or other form of vehicle before we arrive us choose to ignore that. at some type of conclusion. There should be a forward looking framework on this.  Relaxation in custom duty for the high performing vehicle: This will unleash competition in commercial vehicle space with a push on fuel efficiency. Toll related issues:  Payment of toll: To pay for using the infrastructure (which in some routes does not exist, Delhi – Jaipur is one example) and  Stoppage time in the queue, on an average at each of the toll truckers spends around 20to 25 minutes and Warehouse/Logistic Sheds in Delhi – Mumbai there are as many as 12 tolls. Just Lease basis think of the fuel wastage if the vehicle is in queue From 25,000 Sq. Ft. to 25 Lakh Sq. Ft. for 3 hours and then you have stoppage time for Contact- Raj Baldewa 09764442260 Email: leasingantariksh@gmail.com road permits.

Happy Diwali Wishes

from

Website: www.antarikshgrp.com

LOGISTICS TIMES October 2014

TRANSPORT MANAGEMENT

should draw a parallel with the US transport policy  Engineering related issue: An Evaluate periodically if transportation aerodynamic improvement to the vehicle gives better fuel mileage strong plan is executed as per plan. Trust and hold to road. treat transporter as a partner, ask  Truck Tires that have lower rolling resistance on road so to increase its life them how they can help in reducing or may be wide base tire that replaces 2 tires and gives strength, control & cost transit time and in bringing down saving. inventory level. Share your load  Even transmission with direct drive in top gear can also provide small planning with them so to ensure they improvements and widely practiced too have visibility. particularly in Europe. Policy related issue:There should be a guideline from government side on which was released in early 2014 and talked about fuel following aspects:  In consistency of driving – A studies shows economy to be increased by 2.5% every passing year. between best and worst driving pattern-fuel economy It has twin advantages: owner will have to replace can be increased by 20 %. Then we increase per km old vehicle to achieve such fuel efficiency plus it helps speed of vehicle on Indian road for as in the US environment as well. where per hour speed is around 50-55 miles or 80-88 To conclude, transport improvement is a shared responsibility of all stake holders. Administrative km/hour.  Trucks are getting bigger &heavier. But the agencies, of course, have greater role to play in terms overall weight limit hasn't changed yet. Trucks need of policy making and in its execution but we as a user to be able to haul more weight using smaller engines must not forget that diesel is scarce resource and it is and fuel tanks. This also dependent on the carrying us - who pay for every liter of diesel used or wasted. So capacity & strength of our road which is for most of let us, together strive to minimize wastage and maximize result - isn’t it something we do day in day out in our the national highways are less than 30 Tons. MORTH (Ministry of road, transport & highway) business. Engineering & Part productivity related issue:

LOGISTICS TIMES October 2014

AGM REPORT

Hat-trick for FSC at ELSC Conclave

Future Supply Chains (FSC) sparkled at the ELSC Conclave & Awards 2014 held last month in Mumbai by winning three awards. Companyâ&#x20AC;&#x2122;s MD Anshu-

man Singh was recognized as The Evangelist of the Year for his untiring efforts towards shaping not just FSC as a technology-enabled

supply chain company but also inspiring the industry as a whole. FSC also won 3PL player of the year- Retail and 3PL player of the year- FMCG. LOGISTICS TIMES October 2014

DHL wins award for “Best Logistics Service Provider of the Year – Airfreight”

DHL Global Forwarding, reached a milestone by winning the ‘Best Logistics Service Provider of the year – Air Freight’ at the recently held Express, Logistics & Supply Chain (ELSC)

conclave. This award was won amidst stiff competition from leading logistics companies in India and is recognition of DHL’s seamless efforts in delivering consistent and timely services

Dynaflex bestowed with Supply Chain Packaging Award Dynaflex Private Limited’ one of the handful manufactures of security and tamper evident envelopes in the world was officially declared as a winner in the category “Supply Chain Packaging Company of the Year” at the ELSC conclave. The awards were collected by Hitesh Shah, National Sales Head, Dyna Corp and Uday Thakker (Chief Operating Officer-COO, Dyna Corp).

LOGISTICS TIMES October 2014

in the air freight business on an uninterrupted basis. “We are delighted to be conferred this prestigious award for the seventh time,” said Samar Nath.

AGM REPORT

EVENTS

Hi-tea for ACCD members

Air Cargo Club Delhi organised the 1st ever Hi-tea event in its history. The event was held at Hotel Radisson on the 12th September 2014. The event was attended by over 100 members of the club and some eminent guests. The guest speaker at the event was Ramneek Kumar, Man-

aging Director CGR MINDS Inc. who gave a very interesting presentation of Business Constraints & their Impact on Growthâ&#x20AC;&#x2122;. The convenor of the event Sumit Mathur, opened the event and the Secretary, Sajan Kalra carried out the other proceedings of the event. President

of the Club, Yashpal Sharma gave a vote of thanks to the speaker and the entire house. The club had organised a interesting campaign on Facebook over the last month and the best picture award was also announced at the event.

LOGISTICS TIMES October 2014

EVENTS

Allcargo Logistics completed phase II of environment conservation campaign

Allcargo Logistics, through its inhouse NGO Avashya Foundation has successfully executed phase II of environment conservation campaign in the tribal hamlets of Sanjay Gandhi National Park and Gorai village of Mumbai. Avashya Foundation in association with NGO Jaag, organized tree plantation, solar lamp distribution and laid foundation stone for toilet project in the interiors of Mumbai.The phase II of conservation campaign included planting and distributing of over 500 fruit bearing plants, distribution of 250 solar lamps and foundation stone of eight toilets were laid down in 4 schools. This is likely to benefit around 200 families across all hamlets namely Patachepani, Aakrachebhati, Kalmacha Fonda, Devipada, Barikpayri, Palasapada, Babarpada, Jamzadpada, Mundapada, Dongarpada and Appapada. Distribution of solar lamps will help LOGISTICS TIMES October 2014

students to devote more number of hours on studies as it provides access of lights to the students and conducive study environment. This will highlight the importance of education and the role it plays to eradicate poverty. Like the previous tree plantation drive, an important aspect of this campaign was also to have voluntary engagement of employees of Allcargo Logistics. Eight employees were personally present throughout the campaign and energetically participated for environment conservation drive. Voluntary engagement of the employees highlighted strong social commitment and demonstrated the care for environment and future generations. Commenting on the successful implementation of phase II of environment conservation campaign, Non Executive Director of Allcargo Logistics Mrs. Arathi Shetty who also

spearheads Avashya Foundation in its initiatives to drive social causes said, â&#x20AC;&#x153;We are extremely delighted on the successful completion of phase II of our green campaign. The core objective of Avashya Foundation is to work for the upliftment of the tribal community, to lay down the importance of education and to work for issues hampering dignity of women. To address these issues Jaag has been the right partner for us as it has always helped us in all our the social causes and thereby helped the tribal community as a whole to develop over a period of time. I would also like to congratulate the entire team of Allcargo who made this possible along with our partners at Jaag. We shall continue our support in spreading a greener and better tomorrow through such programmes and other such social initiatives.â&#x20AC;?

RNI No. DELENG/2011/39329

Regd No.: DL(E)-20/5380/2014-16