The logistics sector in India has been a catalyst for economic growth. In India, around 60% of cargo transportation is done through roads. The Indian logistics sector is estimated to be worth around $160 billion. It is expected to reach $215 billion by 2020.
India, with a population of 1.3 billion, is a growing domestic consumer market and the logistics sector has an important role to play in economic integration of the market. The logistics sector is estimated to provide employment to 13.9 million people between 2018 and 2022.
Santosh Saraf, CMD, Road Cargo Movers, told BE, “The road logistics sector still relies on the unorganised segment. Only new transporters have their own trucks, but the majority still take trucks on rent from individual truck owners.”
The sector is affected by infrastructural issues, specific government policies, and taxation problems. Narrow highways, limited road density of highways or expressways and limited alternate routing options, lack of road connectivity to remote hinterlands are some of the infrastructural challenges. Talking about infrastructural limitations, Virender Gupta, MD, Premier Roadlines, informed BE, “There is a lack of lighting, parking lots, and medical facilities on Indian highways.”
Saraf pointed out, “The main competition to our sector is emerging in the form of big budget e-commerce service providers who are initiating their own logistics facilities, posing a serious challenge to traditional players.” He added, “My business in mainly based in eastern India and no new industry has arrived in West Bengal in the last decade. Lack of new industries is posing serious challenges to players in the logistics sector in the state.”
The Logistics Ease across Different States (LEADS) index, a composite indicator to assess international trade logistics across states and Union Territories in India, indicates that there is huge infrastructural disparity between different states in the country. Gupta told, “The infrastructure is not up to mark and uniform throughout India. The north-eastern states, for example, have weak infrastructure. Additionally, in Chhattisgarh and Odisha, medical facilities, breakdown services, authorised vehicle service stations, petrol pumps, and security issues are major concerns.”
Harsh Arora, Business Head, BVC Logistics, a company operating mainly in the high value jewellery logistics segment stated, “There is need to improve safety measures in road transport. Due to inadequate safety measures, we prefer air transport which is more expensive. Additionally, though there has been implementation of a uniform GST regime, there are certain states which are implementing stringent regulations that are negatively impacting the logistics sector.”
High fuel prices increasing difficulties
The newly issued surcharge on fuel prices will adversely affect profitability in the already stressed sector. Gupta stated, “The purpose behind this fuel surcharge is the betterment of road infrastructure in India. However, this surcharge and the resultant rise in diesel prices are putting pressure on the road logistics sector.” While the fuel surcharge would have a definite impact on the freight and logistics sector, the increased cost is to be ultimately borne by the final consumer.
Government pushing road infrastructure
Through the Bharatmala project, the government has promised to strengthen the road network in India. It also plans to build more roads, highways, Greenfield expressways and bridges with an investment of around $107 billion. The Sagarmala initiative has been a positive step aimed at doubling India’s coastal shipping.
The Dedicated Freight Corridor Corporation of India (DFCCIL) is a special purpose organisation set up under the administrative control of Ministry of Railways to undertake planning, development, mobilisation of financial resources and construction, maintenance and operation of Dedicated Freight Corridors (DFCs). Once implemented, 70% of freight is expected to shift to these DFCs. DFCs would aid in decongestion of highways, as one freight train would be able to carry a load equivalent to 1,300 trucks. However, until these DFCs are implemented, there will be a continuous dependency on roadways for India’s logistical needs.