Deepak Nandal

7/29/2019 Deepak Nandal

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APROJECT REPORT

ON

ANALYSIS OF LOGISTIC SECTOR

TOWARDSD PARTIAL FULLFILLMENT OF PGDBM (F/T)

COURSE

Submited to:- submitted by:-Mr.Puneet Jain Dipak Nandal (39)


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About Religare

Religare is driven by ethical and dynamic process for wealth creation. Based on this, the

company started its Endeavour in the financial market.

Religare Enterprises Limited (A Ranbaxy Promoter Group Company) through Religare

Securities Limited, Religare Finvest Limited, Religare Commodities Limited and

Religare Insurance Advisory Services Limited provides integrated financial solutions to

its corporate, retail and wealth management clients. Today, we provide various financial

services which include Investment Banking, Corporate Finance, Portfolio Management

Services, Equity & Commodity Broking, Insurance and Mutual Funds. Plus, theres a lot

more to come your way.

Religare is proud of being a truly professional financial service provider managed by a

highly skilled team, who have proven track record in their respective domains. Religare

operations are managed by more than 2000 highly skilled professionals who subscribe to

Religare philosophy and are spread across its country wide branches.

Today, we have a growing network of more than 150 branches and more than 300

business partners spread across more than 180 cities in India and a fully operational

international office at London. However, our target is to have 350 branches and 1000business partners in 300 cities of India and more than 7 International offices by the end of

2006.

Unlike a traditional broking firm, Religare group works on the philosophy of partnering

for wealth creation. We not only execute trades for our clients but also provide them

critical and timely investment advice. The growing list of financial institutions with

which Religare is empanelled as an approved broker is a reflection of the high level

service standard maintained by the company.


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Group Companies

Religare Enterprises Limited group comprises of Religare Securities Limited, Religare

Commodities Limited, Religare Finvest Limited and Religare Insurance Advisory

Limited which deal in equity, commodity and financial services business

Religare Securities Ltd

RSL is one of the leading broking houses of India and are dealing into Equity Broking,

Depository Services, Portfolio Management Services, Institutional Equity Brokerage &

Research, Investment Banking and Corporate Finance

Extension of services has been a constant feature in Religare to regard the needs of our

clients. Consequently, company is soon going to launch Internet Trading and Merchant

Banking. This would take care of different investment needs of different classes of

investors.

To facilitate free and fare trading process Religare is a member of major financial

institutions like, National Stock Exchange of India, Bombay Stock Exchange of India,

Depository Participant with National Securities Depository Limited and Central

Depository Services (I) Limited, and a SEBI approved Portfolio Manager

RSL serves a platform to all segments of investors to avail the opportunities offered by

investing in Indian equities either on their own or through managed funds in Portfolio

Management.

Religare Commodities Ltd

Religare is a member of NCDEX and MCX and provides platform for trading in

commodities, which is an online facility also.

RCL provides platform to both agro and non-agro commodity traders to derive the actual

price of the commodity and also to trade and hedge actively in the growing commodity

trading market in India.

With this realisation, Religare Commodities is coming up with its branches at 42 mandi

locations. It is a flagship effort from our team which would be helpful in facilitating trade

and speculating price of commodities in future.


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Religare Finvest Ltd

Religare Finvest Limited (RFL), a Non Banking Finance Company (NBFC) is

aggressively making a name in the financial services arena in India. In a fast paced,

constantly changing dynamic business environment, RFL has delivered the mostcompetitive products and services.

RFL is primarily engaged in the business of providing finance against securities in the

secondary market. It also provides finance for application in Initial Public Offers to non-

retail clients in the primary market.

RFL is also planning to initiate personal loan portfolio as fund based activity and mutual

fund distribution as fee based activities.

Along with this, the company also undertakes non-fund based advisory operations in the

field of Corporate Financing in the nature of Credit Syndication which includes inter alia,

bills discounting, inter corporate deposit, working capital loan syndication, placement of

private equity and other structured products.

Religare Insurance Advisory Ltd

Religare has been taking care of financial services for long but there was a missing link.

Financial planning is incomplete without protective measure i.e. structured products to

take care of event of things that may go wrong.

Consequently, Religare is soon coming up with Religare Insurance Advisory Services

Limited. As composite insurance broker, we would deal in both insurance and

reinsurance, providing our clients risk transfer solutions on life and non-life sides

This service will take benefit of Religares vast business empire spread throughout the

country -- providing our valued clients insurance services across India. We aim to have a

wide reach with our services literally! Thats why we are catering the insurance

requirements of both retail and corporate segments with products of all the insurance

companies on life and non-life side.

Still, there is more in store. We also cater individuals with a complete suite of insurance

solutions, both life and general to mitigate risks to life and assets through our existing

network of over 150 branches expected to reach 250 by the end of this year!


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For corporate clients, we will be offering value based customised solutions to cover all

risks which their business is exposed to. Our clients will be supported by an operations

team equipped with the best of technology support.

Religare Insurance Advisory aims to provide neutral, transparent and professional risktransfer advice to become the first choice of India.

Management Profile

Religare team is led by a very eminent Board of Directors who provide policy guidance

and work under the active leadership of its CEO & Managing Director and support of its

Central Guidance Team.

Board of Directors

Following is the list of Directors of Religare Securities Limited

Vision

Providing integrated financial care driven by the relationship of trust and confidence.

Mission

To be India's first Multinational providing complete financial services solution across the

globe.

Chairman Mr. Harpal Singh

Managing Director Mr. Sunil Godhwani

Director Mr. Vinay Kumar Kaul

Director Mr. Malvinder Mohan Singh

Director Mr. Shivinder Mohan Singh


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IntroductionLogistics is the total course of activities involving moving goods from the place of origin

to the place of destination in the timely and cost-efficient manner. The concept of

logistics covers all activities relating to the procurement, transport, trans-shipment and

storage of goods. Till a few years ago, the term Logistics simply meant movement of

goods from one place to another. However, since the early nineties, there has been a sea

change in the role of logistics solutions providers. Recognizing the need and the

requirement of businesses today, logistics companies are now seeking to provide

complete supply chain solutions to their customers. Therefore, in addition to the basic

transportation, the companies are providing value-added services such as warehousing,

inventory management, freight forwarding, and express services.

The size of the logistic sector globally is $ 2 trillion, while size of Indian logistics

industry is around $ 89.8 bn.

The total revenue from logistics and supply chain management industry was estimated at

$13.5 bn (approximately Rs 600 bn) in 2003 and is forecasted to reach $19.5 bn by 2009.

Logistics cost as a percentage of GDP is higher at 13% when compared to an average of

10% in other developing countries and it is likely to come down to an average of 10% of

GDP for India. This will be due to higher efficiencies and will not have any adverse

impact on companies under coverage.

An efficient logistics or transport system is a precondition for constant economic

development. It is not only the key infrastructural input for the growth process but also

lays a considerable role in promoting national integration, which is particularly important

in a large country like India.

Serving a land area of 3.3 million square km and a population of one billion, Indias

transport system is one of the largest in the world. It consists mainly of roads, railways,


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and air services. In a few states, inland water transport plays a small supplementary role.

And with its long coastline, India has almost 200 seaports.

The sector has expanded manifold in the first fifty years of planned development, both in

terms of spread and capacity. Along with the increase in quantity, there have been several

developments of qualitative nature, such as emergence of a multi-modal system in the

form of container transport, marked reduction in arrears of obsolete assets, improvement

in the self- financing capacity of the sector and the establishment of new centers of

excellence for manpower development. Even after this impressive growth, the countrys

transport system is far from adequate both in terms of spread and capacity and suffers

from a large number of deficiencies and bottlenecks. The quality and productivity of the

transport network and resources also needs improvement.

Logistics is an important part of every economy and every business entity. Logistics cost

average about 12% of the worlds GDP. The worldwide trend in globalization has led

many manufacturing firms to outsource their logistics function to third party logistics

(3PL) companies, so as to focus on their core competencies.

Logistics largely is defined as a spectrum of transportation modes. Below we present

an evolutionary model


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Logistics evolving from 3 PL to 4PL (Lead Logistics Provide)

A 4PL is an integrator that assembles the resources, capabilities, and technology of its

own organization and other organizations to design, build and run comprehensive supply

chain solutions.

4PL organization would build a set of activities focused around a specific set of supply

chain initiatives and goals, generally with the following characteristics.

4PL Common Services (invoice management, call centers, warehouse/distributionfacilities).

Implementation Center (the business process analysis/scoping, and developmentof all activities into an systems framework).

Product/Skill Centers (supply chain engineering).

IT System Center (the pure IT selection for design and implementation/connectivity).

4PL Back Office (administration, quality, finance, legal, etc.).

Indian logistics industry still alien to 4PL concept

Indian logistics industry so far has been much unorganized with different players

handling different aspects of cargo handling. It is only recently in India that companies

have realized of outsourcing their logistics requirements to a single player and focus on

their respective core competencies. 3PL still is a new concept in India.


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A 3PL company is an external provider who manages, controls, and delivers logistics

services on behalf of the shipper. Third party logistics (3PL) provider is an outsourced

provider that manages all or a significant part of the logistics requirements of

manufacturers and traders and performs transportation, locating and some product

consolidation activities.

Revenues for the 3PL market in India were estimated at $250 million in 2003. Market for

3PL services is forecasted to grow at a CAGR of 20.4% over the period 2004-09. This

market is expected to generate revenues of $970.3 million by 2009.

Indias transport system handles 870 btkm (billion tonne kilometers) of freight and 2450

billion passengers-kilometers a year.

Revenues of logistics industry from manufacturing sector were estimated at $13460

million in 2003. Revenues are forecasted to reach $19540 million by 2009 on the strength

of a growing economy and higher international trade. Chemicals, metal & metal products,

MCG, cement and textiles are the top five revenue contributors for logistics.

The 3PL market is witnessing higher growth due to entry of MNCs, and exports focus of

Indian companies. This market is expected to generate revenues of $970.3 million by

2009.

Currently, automotive, IT hardware and FMCG companies are large users of 3PL

services. Emerging users include textiles, auto components, retail and pharmaceuticals

industries.

Plan outlay for transport sector (Roads, Railways, Air transport) has not been sufficient

enough to remove the bottlenecks for sustained economic development.


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The government plans to focus on following thrust areas to increase

efficiencies in the sector

Meeting the transport demand generated by higher growth of gross domestic

product (GDP).

Ensuring transport growth in a manner that all regions of the country participate

in the process of economic development and has paid special attention to

integrating remote regions such as the North-East into the economic mainstream.

Capacity augmentation, quality, and productivity improvements through

technology up gradation and modernization.

Emphasis on higher maintenance standards so as to reduce the need for frequent

reconstruction of capacity. Higher generation of internal resources and increased

private sector participation in providing transport services.

Increase in overall economic efficiency by bringing in competition into the

provision and maintenance of transport infrastructure and services wherever

possible.

Higher emphasis on safety, energy efficiency, environmental conservation and

social impact.

Developing an optimal inter-modal mix, where each mode operates efficiently

and according to its comparative advantage, and complements services provided

by other modes of transport.


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Port based logistics

There are 12 major ports and 185 minor ports on a coastline of over 6000 km. The 12

major ports handle about 75% of port traffic. Traffic at the 12 major ports totaled almost

423 million tons in 2005-06. Overall growth in Indias port traffic was 11% in 2004-05,

and for 2005-06 it was 10.3%. All indications are that the port sector is going to

experience explosive growth. By way of comparison, Chinas Shanghai Port alone

handles well over 100 million tons of Containerized cargo in 2003/04, while Hong Kong

handled over 200 million tons of container traffic. Major ports are operated by port trusts

under the jurisdiction of the central government, while minor ports are under the purview

of their respective state governments. The tariffs at major ports are regulated by the Tariff

authority for Major Ports (TAMP). Until recently, all major ports have handled more

traffic than their rated capacities. Although the situation has improved with capacity

augmentation, the capacities as rated are 50-60 percent lower than those at comparable

ports elsewhere in Asia.


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Inland waterwaysWhile India has 14,500 km of rivers and canals navigable at least by country boats,

inland water transport is very limited, and in many states, it is declining. Three major

waterways have been declared National Waterways (the Ganga, the Brahmaputra, and the

West Coast Canal, totaling 2,716 km), and their development and maintenance rests with

the National Waterways Authority of India. Other waterways are managed by the

respective state governments. At present, only about 5,200 km of major rivers and 485

km of canals are suitable for mechanized crafts. The entire subsector carries only 1.5

billion ton-km of cargo a year, which accounts for less than 0.2 percent of the total inland

cargo market of the country.

Port Developments 1995 to 2005 Container handling productivity was only 2000 tons/ship-berth-day, this is now

7405 tons

General cargo productivity was 823 tons/ship-berth day, this is now 1691 tons.

Port organization has shifted to the landlord port model, greater autonomy of

management, and the very substantial involvement of private operators

Tariff Authority for major Ports (TAMP) as independent regulator facilitates

private investment


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(Traffic Projected by the Working Group on Port Sector for the Tenth Five Year Plan

(2002-07) vis--vis actual performance as on Mar-06)

Major ports have traced 10.3% growth in cargo handling with countries 13 major ports

handling 423 MT as against 383 MT posted in FY05.

Mumbai port has stolen the show registering a growth of 25.7% as against visahkapatnam

which grew by 11.2% and countries largest cargo volume of 55.8 MT in FY06.

National Maritime Development Program-A positive stepAn investment of Rs 580 bn (about $15 billion) is expected over a ten-year period.

Private sector is expected to invest Rs 350 bn or about 60% of the total. Most of the rest

would be from Port Authorities internal cash generation Rs 56 bn, and budget support ofRs 106 bn. In addition, the road and rail sectors are expected to contribute Rs 26 bn for

port hinterland connectivity improvements. All major ports are included in NMDP, but

largest investments are for Mumbai JNPT, Cochin, New Mangalore and Kolkata NMDP

also includes the Sethu Samudram project to dredge a navigable channel between India

and Sri Lanka.


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Private partnerships to drive port infrastructureIndias port infrastructure requires a major investment in the coming years to cope up

with the heightened activity in the Indian trade. Projects worth Rs 61.3 bn are already

under implementation with private partnerships.


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It is clear that whilst container traffic is going to exponentially increase, growth is likely

to be experienced in existing container terminals having low base and proximity to the

main load centers. This is due to the current leaders JNPT and Chennai port facing

connectivity congestion and choking even back-up infrastructure.

The government has proposed a total investment of Rs 49 bn for various infrastructural

projects into the port sector.

Containerization: changing the world tradeContainerisation is the method of packing goods in reusable containers of uniform shape

and size for transportation. Containerisation also means an article of transport equipment

intended to facilitate the carriage of goods by one or more modes of transport, without

intermediate loading. Goods normally are of different shapes and in different quantities,

but when packed and shipped in containers, it can be handled, as a single piece thus

making it a lot easier to transport.

Before containerisation, handling and transport of cargo was done piece by piece and

hence was time consuming. With the arrival of containerisation, shippers started stuffing

their goods into containers and delivered them to the port container yard for shipment.

Containerised transport succeeded because it ensured safety of goods transported,

reduction in the packing cost and multiple handling risks and also increased the speed of

transportation. Containerisation also enables intermodal transport, i.e. the total movement


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from the origin to the destination, using different modes enroute like roadways, railways,

shipping, airlines etc.

The popularity of containerisation is due to the fact that packing goods even in

substantially lighter wooden or metal casings ensures easier transshipment and more

importantly can be used for an estimated 75% of the total general cargo volume.

Containerisation solved the problem of congestion in harbours because of increased

efficiency in handling of cargo, leading to quicker turnaround times for container vessels.

Containers come in different types and shapes. The standard lengths are 10 feet, 20 feet,

30 feet 40 feet and 45 feet but the most common containers are 20 feet (TEU) and 40 feet

(FEU) containers. Standardisation of containers promoted mechanized form of cargo

handling. Ease of handling cargo in containerised form shifted the focus from disparate

transport activities towards a transportation chain. Without rehandling of goods,

containerised cargo can be transferred from terminal to terminal or directly from producer

to consumer (door-to-door transport). The upscaling and integration of cargo transport

marked the arrival of a transport revolution.

The Volume of containerized trade will continue to grow faster than world economy.

Worldwide, transport growth has been consistently higher than the economic growth.

This revolution spread rapidly in developed countries and in port hubs like Hamburg,

Rotterdam, Singapore and Hong Kong. Between 1968 and 1974, the number of container

transshipments steadily rose from 150,000 TEU to 1,107,000 TEU at the largest

European harbour, the Rotterdam harbour. The acceptance of containerisation of general

cargo progressed steadily over the last decade and nearly 80 per cent of the global general

cargo volumes generated are shipped in containerised form.

The attractiveness of containerisation is it ensures safe transportation of goods & enables

ease in total movement from point of origination to destination. Over the years there has

been gradual shift towards containerised method for transportation.


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Containerised means of transportation is being increasingly preferred over other means,

as is visible in increased market share from 8% to 14% in total cargo over a period of 9

years (1994-2003). Over the period container traffic have shown higher growth rate

compared to total growth rate in traffic. Containerisation can be used for almost 75% of

total cargo volume. Total containerised traffic in India has grown from 15.35 mn tonnes

in 1994-95 to 43.67 mn tonnes in 2002-03, a CAGR of 14%, compared to 6% of overall

export-import trade during same period.

Shipping lines have been the major proponents of containerisation. Recognizing the

potential of improving efficiency through containerised cargo, shipping lines constructed

ships that were dedicated for containerised cargo movement. In a short span of 4 decades,

the handling capacity of a dedicated container fleet was comparable to the handling

capacity of a general cargo fleet. As of January 1, 2004, the fully dedicated container

fleet stood at 3,036 ships with 90.20 mn dwt capacities and the general cargo fleet

comprised of 16,487 ships with 95.20 mn dwt capacities.

The fleet of ships that handle containerised cargo is concentrated among a few shipping

lines. Approximately 75% of the global TEU capacity is controlled by 15 shipping lines.

Maersk Sealand, Mediterranean Shipping Corporation (MSC) & Evergreen are the largest

independent global players in this market contributing to over 56% of the world TEU

capacity. Leading global alliances like CMA CGM, CHKY Alliance (Hanjin, K-line,

Cosco & Yang MIng), Wan Hai/ PIL, Grand Alliance (P&O Nedloyd, Hapag Lloyd,

NYK, OOCL), New World Alliance (VAPL, HMM, MOL, NOL) contribute to another

28% container cargo movement.


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Constraints for growth of ports

Berth capacities do not appear to be a problem for most ports in India. Instead, the

problem seems to be that real berth capacities have not been used efficiently. Equipment

use on berths is extremely low about 30-35 percent resulting in high turnaround times for

vessels. In addition, low productivity of equipment and labour increases handling costs

for cargo and containers. These factors prohibit major shipping lines from bringing

mother container ships for handling at Indian ports, adding to the transport costs of

exports and imports.

CFS & ICDCFS & ICD are part of the logistic chain. In many cases, CFS & ICD are same, as both

provide service of movement & clearance of goods. The only difference between ICD &

CFS is that the former (ICD) enables transportation of goods from within country to near

a port, while the later (CFS) works near port or international gateway where import-

export of goods take place.


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Need for CFSs / ICDs

Ports and harbors, due to inherent structural and procedural constraints, could not

accommodate the increased traffic in containerisable cargo. Such increase in container

traffic necessitated ancillary facilities which could

Provide a place for speedy evacuation of import containers from the port;

Provide a place where the activities like unitization, stuffing, de-stuffing and

regulatory clearances could be undertaken;

Act as a warehouse to ensure safety & security of cargo during in-transit storage;

Provide a place for storage and transport of empty containers.

This led to the development of distribution parks. Globally, distribution parks

are referred to as distriparks, which are typically congregations of warehouses

in particular locations. The critical element behind the concept is the provision of

extended logistics services given the increasing need for integrated logistics and

value-added services. These distriparks are more popularly known as Container

Freight Stations (CFS) and Inland Container Depots (ICDs).


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Road transport

During the 1990s, Indias economy has grown by 6 to 7 percent a year, and its total

transport demand has grown by about 10 percent a year. The road sector, which already

enjoys an 80 percent share of land transport demand, has witnessed a 12 percent annual

growth in freight demand and 8 percent in passenger demand.

But the demand for rail transport has grown at a slower pace, at just 1.4 percent a year for

freight and 3.6 percent a year for passenger due to intense competition from road

transport and operational inefficiencies and capacity constraints on key routes have also

played a role in the slow growth of Indias rail traffic.

The share of road transport alone is 3.69% of GDP, while share of all transport

contributes 5.5% to GDP.

If GDP is to grow at 10 percent a year over the next 10 years or so as intended by the

governments Tenth Five-Year Plan (2002-07), then the demand for transport will, in all

likelihood, grow by at least 12 percent a year.

Indias transport system handles 80 btkm of freight and 2450 billion passengers

kilometers a year.

The plan perspective

The Ninth Plan (1997-2002) envisaged a comprehensive package to address various

transport sector issues. It emphasized the need for improving the capacity and quality of

the transportation system through technological up gradation. It also laid stress on

improvement of the self financing capacity of this sector and on the need for ensuring an

improved transport system to provide speedy, efficient, safe and economical carriage of

goods and people.


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The Tenth Plan Document (2002-2007) reiterates the need for expeditious development

of the Primary system [National Highways (NH) and Expressways], Secondary system

[State Highways (SH) and Major District Roads (MDR)] and Rural Roads. The

expeditious completion of the Golden Quadrilateral as also the North-South and East-

West corridors is therefore essential. The encouragement of private sector participation in

the Highway Sector, levy of tolls on NH network, phased removal of deficiencies in the

existing NH network, provision of wayside amenities along highways, popularization of

use of containers and multi-axle vehicles in the carriage of goods for reducing

transportation cost and road safety are some of the other major thrust areas.

The outlay for Central Sector roads for the Tenth Plan is Rs.594 bn. This includes Rs.347

bn of budgetary support and Rs.247 bn of internal and extra budgetary resources (IEBR).

Road Network of India

India having 3.34 million kilometers of road network is the second largest in the

world.

As per present estimate, road network carry nearly 65% of freight and 85% of

passenger traffic.

Traffic on roads is growing at a rate of 7 to 10% per annum while the vehicle

population growth is of the order of 12% per annum.


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Long way to go-Impediments

25 percent of National and State highways are congested. Truck speeds average

only 30-40 km per hour.

Economic losses from congestion on account of poor roads at Rs. 200-300 bn a

year and due to road accidents about Rs. 100 bn. The social costs for the freight

carried by road according to another estimate are in the range of Rs.0.6 to 0.8 per

tonne km.

The total energy surplus made up of domestic production and imports; nearly 40

percent is consumed by road transport vehicles.

There are highly negative environmental consequences of poor transport. Road

sector contributes about 47 million tonnes of Carbon Monoxide (CO) in a year.

With higher than average traffic growth is projected at several corridors,

substantial capacity enhancements will be required over the next 10-15 years. It is


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estimated that Rs. 3000 billion would be required to expand National, State

Highways and Expressways by 2012 to meet this demand.

Railways

The Indian Railways, with a capital base of about Rs. 550 bn, is the principal mode of

transportation for carrying bulk freight and long distance passenger traffic. Given Indias

continental size, geography, resource endowment and diversity, the Railways play a key

role in not only meeting the transport needs of the country, but also in binding together

dispersed areas, thus, promoting national integration. It also plays a key role during war

and emergencies when huge quantities of material and men are required to be moved

across the country at short notice. In spite of these inherent advantages, the Railways,

which is the sole high capacity transport mode capable of meeting the long-term transport

needs of the country, it has not maintained its market share.

The Indian Railways (IR) holds a prominent position in the public sector. IR is a central

government monopoly with a mandate not only to provide rail transport services, but also

to fulfill certain social obligations. The system provides intercity freight and passenger

services as well as suburban commuter rail services in major cities. In addition, IR ownsand operates almost all other rail transport support services, including design and

manufacturing of rolling stock, rail catering, schools, technical institutes, housing,

hospitals, and hotels. The railway budget is presented a day before the central budget is

allocated to other sectors. Its revenues account for about one percent of GDP, and IR is

also the Indian organization with the maximum number of employees, numbering 1.6

million. IR is managed by the Railway Board and is divided into nine zonal railways.

The rail network is extensive. Of the 63,000 km of rail track, about 44,000 km are broad

gauge and the rest are mainly meter gauge. But only 15,000 km are double or multitrack.

Not only is IR facing capacity constraints on its high-density corridors, but its operations

also suffer from maintenance backlog. Insufficient maintenance of rail tracks and rolling

stock is leading to more accidents and train derailing, higher operating costs, and lost


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revenue from suspended operations on the affected lines. For the past 20 years, freight

trains have run at an average of 23 km an hour; with electrification and modern

locomotives the average speed could have increased to 40-50 km an hour.

Ninth Five Year Plan Growth in Freight and Passenger Traffic

Freight

The freight traffic projections for the terminal year of the Plan have been based on the

demand projection and the users forecast. The freight traffic is expected to increase atthe rate of 5 per cent per annum. The projections in terms of originating freight traffic

and freight tonne kms are given in table below:

Passenger trafficPassenger traffic is expected to increase at the rate of 5.7 per cent in the Tenth Plan.

Indicates traffic projections for the passenger traffic.


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Comparative assessment of Indian Railways and Chinese Railways

In the early 1990s, the Indian Railways was bigger in terms of total route km, as

well as route km/sq.km.

In the period 1992 - 2002, the Chinese Railways extended its route km by 13,797

km (24 %), double track by 9,400 km and electrified track by 8,975 km. During

the same period, the Indian Railways network grew by only 682 routes km. (1%),

double track by 1519 km and electrified track by 5,192 km.

Investment outlays for the Indian Railways over the 1992-2002 decade totaled

$17.3 billion, in contrast to $85 bn spent by the Chinese Railways.

While the two networks are roughly comparable in size, the Chinese Railways

output in traffic units (TU = pkm+tkm) is 2.5 times that of Indian Railways.

Between 1992 and 2002, the two railways carried almost exactly the same volume

of passenger-km, but the Chinese Railways carried four and half times the freight

tkm carried by Indian Railways.

Average employee output on Chinese Railways is 2.1 times that of Indian

Railways.

Staff costs (excluding pensions) for Indian Railways is about 40 per cent while it

is just 25 per cent of ordinary working expenses in the case of Chinese Railways.

The average passenger tariff in India is 55% lower than in China.

The average freight tariff in India is almost 66% higher than in China.


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Air Cargo

At present the air cargo industry in India is worth Rs.100bn and it is expected to reach Rs

400 bn in the next five years. It is growing by leaps and bounds at rate of 30% YoY in

India while globally it is growing at only 18%.

The air transport is mainly used for high value items and perishable goods for increased

safety and faster delivery. Around 10% volume of Indias EXIM trade is by air. Indias

air cargo traffic has risen from 7.97 lakh tones in 1999-2000 to 8.4 lakh tones in 2001-02

and 10.6 lakh tones in 2003-04 to 12.8 lakh tones in 2004-05. This reflects a 20% growth

from FY04 to FY05.

Traffic handled during Apr-Mar

At present, apart from Air India, Indian Airlines and Alliance Air, Jet Airways, Sahara

India Airlines, Deccan Aviation Pvt. Ltd., GO Air,M/s Blue Dart Aviation Pvt. Ltd.

(Cargo only) have the permission to operate domestic scheduled air transport services in

the country.


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The Airports Authority of India has drawn a plan for City Side Development of 25 Non-

Metro Airports. In the first phase 10 Non-Metro Airports namely, Ahmedabad, Amritsar,

Guwahati, Goa, Jaipur, Lucknow, Mangalore, Madurai, Udaipur and Trivandrum have

been taken up for which Global Technical Advisor (GTA) and Indian Financial

Consultant (IFC) have been appointed. AAI proposes to take up similar study for

remaining 15 Non-Metro Airports which are Agatti, Aurangabad, Bhopal,

Bhubaneshwar, Coimbatore, Indore, Khajuraho, Patna, Port Blair, Nagpur, Rajkot, Trichi,

Vadodara, Varanasi and Vishakhapatnam.

Long term growth in Available Tones Kilometers (ATKMs) and Revenue Tonnes

Kilometers (RTKMs) performed on domestic scheduled service by all scheduled airlines

during last ten years.

Over the years Available Tonnes Kilometers (ATKMs) have increased by 122.8% from

1145(FY94) to 2551 in FY04 at the same time Freight and passenger traffic has also

increased by almost the same rate. Weight Load Factor (WLF) has remained constant

over the years due to proportionate increase in passenger and cargo traffic.


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Express/Courier Industry

The core business of the express industry is the prerequisite of value-added, door-to door

transport and deliveries of next-day or time-definite shipments, including documents,

parcels and merchandise goods. (Time-definite shipments normally incur a transit time of

between 2 and 3 days.) Four companies DHL, FedEx, TNT and UPS, also referred to as

integrators are the leaders of the global express industry, but there are many others in

this highly competitive sector. The term integrator refers to the ability of these

companies to offer door-to-door, time-definite integrated services, where the company

maintains control over all aspects of the distribution process for instance, by offering

the possibility of changing the destination and addressee in transit and with each item

being tracked at every step throughout its journey.

The express industry simplifies and speeds up the process of transporting goods. It

organizes collection, allows the sender access to information on the progress of

shipments from pick-up to delivery, and provides proof of delivery. Where shipments

cross international borders, the express industry handles customs clearance as well as the

payment of duties and taxes as required. Figure below demonstrates the key stages

involved in a typical express delivery.

Other transport operators on their own cannot respond to the needs of business as

effectively as the express industry. In particular, they are not able to offer the same level

of rapid, guaranteed delivery to as wide a range of destinations.

To meet the requirements of business, the express industry relies on overnight transport

to use the dead time from when a company hands over its shipment late in the working

day to delivery to the recipient early the following day. Express transportation is achieved

by using a variety of different transport modes; lorries, vans, trains, passenger aircraft and

freight aircraft as well as on-foot delivery. Where possible, though, the express industry

uses surface transport modes. Air express services are only used where there are no other

options available to meet same day and next-day delivery requirements.


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Global size

The express industry globally is estimated to have generated total sales revenue (ie

turnover) of US$130 billion in 2003. While the express industry itself is a small part of

the global economy, it has been growing very rapidly. Stripping out the effects of

inflation, the express industrys turnover is estimated to have risen by almost 35% in real

terms since 1998 i.e. at an average annualized rate of almost 6% a year, nearly 2

times the rate of growth of the world economy as a whole.

USA forms the largest express market in the world, with estimated revenues of US$59

billion in 2003; the express sector now accounts for over 60% of the US domestic air

cargo market. With revenues of US$33 billon and US$26 billion respectively, the

European and Asia-Pacific markets for express services have significant scope for further

Expansion as companies increasingly adopts best international business practice with

regard to time-definite, guaranteed delivery.

The vast majority of express deliveries are inter-regional i.e between countries and states

within the Americas, Europe or Asia-Pacific. Express deliveries between these three

regions account for just under 10% of total express industry revenues. Nevertheless,

intra-regional express deliveries generated revenues of almost US$11 billion in 2003. Themarket for express services in the rest of the world is estimated at less than US$4 billion.

The express industrys main client sectors

On the basis of previous studies of the economic impact of the express industry which

use both information from the integrators on the value their purchases from suppliers and

the input-output tables prepared by national statistical offices, we estimate that the 1.25

million direct jobs in the express industry generate an additional 875,000 indirect jobs

globally through the supply-chain.


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Future of Global Express Industry

Over the last five years the express industry has been one of the fastest growing sectors of

the global economy, with turnover rising on an average by almost 6% a year in real terms

(ie over-and-above inflation), nearly 2 times the rate of growth of the world economy as

a whole.

The express industry is likely to remain one of the worlds fastest-growing sectors. The

requirement for rapid delivery is likely to intensify further among existing users of the

express industry and spread to other sectors of the economy as, for example, more

businesses use the internet for purchasing and supply management, and the demand for

logistics services increases. And while the market for express services is relatively

mature in developed economies, such as the US and EU, there is considerable scope for

expansion in emerging economies, particularly in Asia and Latin America.

Moreover, international trade is expected to continue to grow rapidly OEF forecasts it

to increase by over 90% over the next decade compared with a rise of almost 40% in

world GDP.


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Boeing expects world air cargo traffic to expand at an average annual rate of 6.2% over

the next two decades, with the fastest growth in Asian markets the domestic Chinese

and intra- Asian cargo markets are forecasted to increase by 10.6% and 8.5% a year

respectively.

OEF expects the express industry to continue to increase its share of the air cargo market,

growing by an average of 8% a year in real terms between 2003 and 2013. This is a little

faster than the growth we expect in world trade (exports and imports). And it is over

twice as fast as our forecast of 3% a year real growth for the world economy as a whole

over the next decade.

The direct contribution of the express industry to global GDP is set to more than doubleby 2013 to about US$135 billion in todays prices. This rate of growth will result in

overall GDP being about US$50 billion higher by 2013 than if the express industry grew

merely in line with GDP growth forecast of 3.2% per annum. (And note that this is only

the direct impact of the express industrys growth: it does not include the indirect or

wider catalytic impacts of strong growth in the express industry on other sectors of the

Economy.)

There will also be benefits to global employment from the express industrys continued

fast growth. In 2003 employment in the express industry is estimated to have been 1.25

million worldwide. OEF expect it to reach 2.1 million by 2013. If express services are

constrained to grow in line with GDP, then employment in the express industry would be

around 750,000 lower than forecasts of 2013.

The expansion of the express industry will support growth in jobs both in its supply chain

(indirect employment) and as its employees purchase goods and services from othersectors (induced employment). The total global employment supported by the express

industry is forecast to increase to almost 4.5 million by 2013. The majority of these new

jobs are expected to be in the developing and transition economies.


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Indias express industry

As compared to the advanced countries, Indian courier industry with a combined turnover

in excess of Rs 40 bn is still in budding stage. Even the courier industry of China is 5 or 6

times bigger than that of India. India has more than 2,500 courier companies. The courier

industry is fragmented with nearly 20 in the organized sector, and remaining being

catered by unorganized players. There are few major players in the organized players

who have a combined market share of close to 90-92%. Four major players dominate the

market Blue Dart Express, AFL, First Flight and Gati. Indian courier industry is projected

to grow annually at 20% over the next five years.

Quick facts about Indian courier and express industry

2,500 operators

Rs 40 bn crore in revenues from servicing distribution needs in India

Rs 22.5 bn in revenues from servicing import/export needs

Rs 6 bn in taxes paid

Over 1 bn shipments moved

Over 1 mn full time equivalent jobs

40,000 tonnes of export air cargo

30,000 tonnes of import air cargo

Rs 25 bn investment in brands and infrastructure.

The Courier Industry, Couriers mostly offer point-to-point document deliveries across

metropolitan areas using manual administration and operational systems. Some offer

small parcel deliveries and some offer regional and even national services. They are all

low cost operators with limited infrastructure and they exist in both organized and

unorganized segments of the economy.

Structure of Express Industry

Express businesses offer document, small package and general distribution services

throughout the country and overseas, on a time-definite basis. They have significant

investments in brand, technology, infrastructure, people and regulatory development.


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They offer wider, value-adding, services than couriers including border management

(Octroi, Customs, and Security), track and trace, trade facilitation, warehousing and

distribution and performance accountability.

The Indian Express Industry has not seen any marked shift in structure in the past year.

The players are slotted into four unambiguous quadrants - the international majors, low-

cost service providers, ground/warehousing suppliers and the premium value segment.

Blue Dart is the sole occupant of the premium value quadrant, clearly differentiated from

all other organisations and, in fact, sharing the attributes of the international

organisations.

User segment

Anyone engaged and is part of the modern Indian economy is a potential customer of a

Courier or Express company. Banks rely on fast, time-certain, reliable, delivery of

negotiable instruments and documents to expedite domestic and international trade.

Business enterprises and lawyers need time certainty in the execution of contracts and

urgent delivery of all manner of urgently required documents and materials.

Companies need time certainty in the movement of payroll data, customer presentations,

tenders, shipping documentation, invoices, order forms etc. Government departments use

Courier and Express services in order to improve efficiency and provide good service.

Many Ministerial departments, government organisations and quasi government bodies

are on Courier and Express companies customer lists.

Courier service is different from cargo service

In the minds of the lay customers, there is a confusion in terms of distinguishing between

a Courier and a Cargo service, it must be circumspectly understood that while a Cargo

service provides transportation and distribution of heavy cargo (in terms of weight and

dimensions) the Courier services are focused in handling documents and small packages/

parcels of upto 10 kgs. Another differentiating factor is that the Courier services focus on


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greater urgency and hence the movement and distribution are largely by air across

regions and by rail within the region.

Indian demographic provides huge upside for the Industry

In a vast country like India, the courier service has huge upside potential in attaining a

level of high customer involvement service category. With a population in excess of one

billion having a strong affluent 300 million middle class population, the potential seems

to be immense. A country having 16 metropolitan cities and 400 towns well linked with

62,000 Kms of highways has still a long way to go as far as its postal and courier services

are concerned.

Domestic express makes up about 60% of the total, of which a little less than half is

organised. The unorganised and semi-organised segments, which consist largely of

regional and intra-city service providers, and EMS Speedpost, account for the rest. The

organised segment, including the international majors share, constitutes approximately

65% of the total and is made up of a small group of fewer than two dozen players. The

Indian courier industry is not regulated and the entry barriers are not high.

Most of the large Indian courier companies of today have had global alliances in the pastthat have helped in enhancing its manpower skills and deploy modern technological

setup. Blue Dart had a tie-up with FedEx and Elbee had association with UPS. The

association helped these pioneers to ramp up in reaching a critical mass and also deploy

process engineering methodology to gradually reduce operational costs without

compromising quality in services. Focus was also maintained on developing the nascent

industry and in brand building. The Indian courier industry started with the angadias

started by local Gujaratis which needed this service for the purpose of delivering high

value item (Diamonds). In 1979, DHL entered the Indian market primarily for handling

international courier shipments out of India. In course of time, it also started offering

domestic courier services in affiliation with domestic players. During the late eighties,

many courier companies mushroomed like First Flight, Overnite, and Blazeflash etc.

These courier companies focused on the domestic business opportunities. This period


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also saw the growth and consolidation by domestic majors like Blue Dart and Elbee both

of whom acquired freighter aircrafts for quicker services and made in-roads in the well

entrenched traditional postal services. The later years saw entry by other international

players like TNT and Worldwide Express etc.

Amendment of The Indian Post Office Bill

The Bill grants an exclusive privilege to the DoP (Department of Post) to

Convey letters up to 500 grams by post from one place to another and all the incidental

services of receiving, collecting, sending, dispatching and delivering all such letters

The proposed definition of the word letter is:

Any written communication, or communication produced by mechanical, electronic or

other means and sent, to and from any person to any specified address and includes

letter-card, post-card, and open or closed envelope, documents or any return or answers

to such documents, sent conveyed or delivered by post but does not include news papers

or parcels;

The Bill attempts to widen the definition of a postal article.

The expression postal article includes letter, letter-card, post-card, newspaper, book,packets, parcel and every article or thing transmissible by post or by any person

authorized to carry such articles under the Act.


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Blue Dart Express

Blue dart is the largest domestic express company in the country with a 39% market

share. DHL Express (Singapore) Pte Ltd has acquired 81.03% equity stake of the

company during 2004-05. The company has 218 offices, 168 franchisees and 173 serviceparticipants. Further the company has 422,000 sq.feet of facilities, including 6 bonded

warehouses and 9 hubs. It delivers to over 13,880 locations in India and 220 countries

worldwide. Service innovations, strong product portfolio have been the key to success for

blue dart.

Company profile

Blue dart is south Asias leading integrated air express carrier and premium logistics

services provider. Blue dart has an domestic network covering over 13,880 locations, and

service more than 220 countries and territories worldwide. The company has 218 offices,

168 franchisees and 173 service participants. Further the company has 422,000 sq.feet of

facilities, including 6 bonded warehouses and 9 hubs.

Business mix

Blue dart has a diverse set of services catering to a wide range of customers. It is the only

courier service to have its own aircrafts and its hub-and spoke model covering a major

part of the country. Blue dart has distinct edge from branding of its services, strong

customer relationships, technological orientation and excellent distribution. The company

has incurred significant capital expenditure in technology and distribution infrastructure,

which add to the high entry barriers for new entrants into the segment in future.


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Domestic priority It has door-to-door delivery service within India and to Bangladesh,

Nepal and Bhutan for documents and small shipments under 32kgs per package. It

delivers to over 13,880 locations in India. This service caters to more of documents as it

requires no government clearances and is time specific. This product caters to high

yielding high value products. (It contributes almost 38% to revenues)

Dart apex Dart Apex is a door-to-door delivery service within India for shipments

weighing 10 kg and above. It is a delivery solution for commercial shipments that are

time bound and require undergoing regulatory clearances, or special handling. Dart Apex

offers an economical option of an Airport-to-Door service from the major airports of

Chennai, Bangalore, Mumbai, Delhi, Kolkata and Hyderabad to all the Dart Apex

locations serviced (It contributes 26% to the revenue).

Dart surfaceline Dart Surface line is an economical, door-to-door, ground distribution

Service within India for shipments weighing 10 kgs and above. It offers a cost-effective

Logistics option for clients less time-sensitive shipments, with the value-added benefits

of time bound delivery, regulatory clearances and tracking (It contributes 10% to the

revenues).

International services Blue Dart, through its parent company DHL, offers DHL

Document Express (DOX), DHL Worldwide Package Express (WPX) and the Jumbo

Box (Jumbo Box - 25 kgs. and Jumbo Junior - 10 kgs.), a one-stop shipping process for

time-definite, door to door delivery of international documents and packages. The service

offers access to 220 countries and territories worldwide and the extensive network of

Blue Dart and DHL (This Contributes 15% to the revenues).

Airport to airport The airport-to-airport service is an air freight service available on

the flights operated by Blue Dart Aviation a associate company (40% holding) between

the airports of Kolkata, Delhi, Mumbai, Bangalore, Chennai and Hyderabad. Blue dart


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has 5 Boeing 737-200 air freighters (16 tonners) through which operations are handled

(This contributes 11% to the revenues).

Interline Blue darts Interline services caters to the need of international airlines

looking to expand their cargo services. Together with its ground handling maintenance

capability and bonded warehouses, Blue dart offers service that is superior comparable to

service available from domestic airline. It already has agreements with 25 international

airlines (Caters to need of global airlines trying to expand cargo services).

Blue dart has been changing its product mix, to align this with its airline operations- by

focusing on higher yielding lower weight packages. The move up the yield curve in

favour domestic priority and APEX products in the document and non-document

business has improved the profitability.

Within document segment Blue Dart is increasing its dominant position in the growing

credit card market and a stronghold within the financial services segment.

Documents contribute 60% of revenues and 35% of the revenues whereas packages/ non-

documents contribute 40% to the revenues and 65% of tonnage capacity. Non documents

provide blue dart greater flexibility to price its products while simultaneously enabling it

to successfully fly its own fleet of aircraft. Intercity connectivity through aircraft and

intra-city through ground its ground fleet enhances Blue darts flexibility.


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Capex

The company is investing Rs 800 mn to ramp up its operations throughout the group. Out

of the total Rs 250 mn are being invested into Blue dart and rest into the associate

company Blue Dart aviation. Blue Dart aviation is procuring 2 Boeing 757 freighters (32

tonnes each) on operational lease, which will take the total tally to 7 aircrafts.

Expanding aviation hubs

The company is setting up its next aviation hub in Ahmedabad in June and adding 45

facilities across the country with a Rs 250 mn investment during the current calendar year

to increase its market share in the air express courier business.

The company currently has three aviation hubs in the southern region in Chennai,

Bangalore and Hyderabad and one each in Mumbai, Delhi and Kolkata.

The company has an overall 6-lakh sq ft of integrated air and ground warehousing

capacity, which would add an aggregate of 1,21,645 sq ft facility area in India by next

year.

Additional aircrafts to increase leverage

The company is adding two new-generation freighter aircraft (Boeing-737) in June 2006

to meet the increasing demand for its services. It currently operates a fleet of five Boeing

737-200 aircraft, with a capacity utilisation of 89 per cent.

The total capacity will increase to 144 tonnes from the current capacity of 80 tonnes an

increase of 80%. The company intends to keep two of the 16 tonners only for chartering

purposes and utilize the two new freighters for increased capacity requirements. This willhelp maintain the utilization levels and also shift the part of the business, which at present

is routed through the other commercial airlines. On an average Blue dart gives business

worth Rs 240 mn annually to other commercial airlines, out of which the company

expects to have savings of Rs 120 mn due to new aircrafts adding capacity.


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Growth driven by extensive investment in infrastructure-The Company has made

sizeable infrastructure investment. Its service network covers 11,880 locations being

served by extensive ground and air distribution system including its over 1,500 vehicles

and 5 Boeing 737-200 freighters. Blue dart has a Hub-and-spoke network model with

hubs at major part of the country. The company has its own warehouses and bonded

warehouses at five major metros (Wide service network, hub-and-spoke model of

distribution).

Intensive use of technology Blue Dart has is the only Indian Air Express Company

that has invested extensively in Technology infrastructure to create differentiated delivery

Capabilities, quality services and customised solutions for the customer. Blue Dart has

one of the largest private computer networks in India, with over 1,750 computer

terminals connected by dedicated leased lines, VSATs and Microwave links. Blue Dart

has its own Customer Service Cell equipped with Automated Call Distribution Systems

(ACDs) to provide quick response and support to its customers.

Blue Dart is the only Indian express company to have indigenously developed COSMAT

IITM, which includes an advanced state-of-the-art track and trace system for all their

consignments. Consignments are scanned from pick up to every transit point till delivery,

using bar coding and laser scanner technology, transmitting updates automatically to

Oracle database. This enables their customers to receive real-time, complete and accurate

information about their consignments. For its aviation system, the company has its own

in-house team, which has developed SMARTTM (Space Management Allocation

Reservations and Tracking) for effective space and revenue management

Blue dart to leverage from DHLs experience

Based in Brussels, Belgium, DHL is 100% owned by Deutsche Post World Net (DPW).

DHL is the no 1 international air express company in the world, with superior hi-tech on-

ground infrastructure, unmatched cross-border specialisation, greater flexibility of its

network and the strongest brand recognition in India and in the world. DHLs

international network links more than 220 countries and territories worldwide. Blue


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Darts takeover would bring DHLs advantage to Blue Darts customers, resulting in

greater customer satisfaction. DHL would also leverage from Blue darts knowledge of

local conditions. Blue Dart has a unique domestic infrastructure and is the only domestic

cargo airline in the SAARC region, with a fleet of 5 Boeing 737 freighters (16 tonners).

Blue Dart can now offer its services to any customer, including any multinational air

express operator, who wishes to avail of distribution within the country and the region.

Concern

The government has proposed to amend the 100-year old Indian Post Office Act, 1898.

Under the proposal, it will establish an independent Mail Regulatory and Development

Authority (MRDA) besides a Mail Disputes Settlement Tribunal to ensure accountability.

In an attempt to regulate the largely unorganized Rs35-bn courier industry, the

Government proposes to impose a one-time registration fee ranging between Rs25, 000

and Rs 1mn on private courier companies. It also intends to call on the private courier

companies with revenues of over Rs2.5mn to contribute 10% of their annual revenue

towards the Universal Services Obligation (USO) fund, which will be used to offer

subsidized postal services in economically unviable areas.

Under the draft Indian Post Office (Amendment) Bill 2006, private courier companies

will also have to cough up an annual renewal fee of Rs10, 000 if the area of operation is

within the country and Rs 0.5 mn if the services include international delivery.

Additionally the Bill grants an exclusive privilege to the DoP to convey letters up to 500

grams by post from one place to another and all the incidental services of receiving,

collecting, sending, dispatching and delivering all such letters

The Bill attempts to widen the definition of a postal article.

The expression postal article includes letter, letter-card, post-card, newspaper, book,

packet, parcel and every article or thing transmissible by post or by any person authorized

to carry such articles under the Act.


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Financials

In FY05 Blue Dart reported net sales of Rs 4.6 bn as compared to Rs 3.5 bn in FY04,

recording a growth of 29.7%. The growth in sales was driven by buoyancy in the Indian

economy and positioning of the company as a premium player in the express cargo

industry.

In FY05, EBITDA grew by 35.2% to Rs 835 mn. EBITDA margins increased by 80 basis

points to 18.2% as compared to 17.4% in FY04, margins improved due to increased

contribution of high value goods resulting in better realizations.

The company has planned a capex of Rs 250 mn in CY06 which will be utilized for

warehouse hub expansion. The capex will be funded through internal accruals as

company has sufficient cash.

Debt-equity ratio which was as high as 1 in FY04 has reduced to 0.14 in CY05 ( 9

Months ended December 05). Going forward we expect debt-equity ratio to be in this

range and further reduce to 0.11 in CY07.

With significant improvement in profitability RoCE is expected to increase to 43.2% inCY06E and marginally reduce to 42.2% in CY07E as capital employed will increase

more than proportionately. RoE is expected to be 32% in CY06E and 30.8% in CY07E.

We expect EBITDA margins to be under pressure going forward as the operating costs

will go up due to addition of two more cargo plane in CY06. We expect EBITDA

margins to be 17.5% in CY06E as compared to 18.2% in CY05 (9 months). EBITDA

margins are likely to go down further as the cargo planes will be operational through out

the year in CY07. PAT margins will be 10% in CY06E and 9.7% in CY07E.


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Conclusion

With India becoming manufacturing hub for high growth industries like automobiles,

auto-ancillaries, pharmaceuticals, electronics, processed foods, oil, construction materials

and in services sectors such as healthcare, Information Technology, finance, construction

and education there is a need for higher spend on logistics infrastructure to sustain the

development needs for our country.

We expect total revenues from logistics and SCM for manufacturing sector is likely to

reach $ 19.5 bn by 2009. We anticipate if Indias GDP is likely to grow by 10% over the

next 10 years then the demand for transport will in all likelihood grow by in excess of

12% every year.

Going forward India requires efficient logistics services to match global standards in

logistics services. As logistics is an asset intensive business it requires huge investments

in roads, ports, air and other related infrastructure to support the growing economic needs

efficiently.

Total investment envisaged in respect of port development is expected to be in region of

US$ 15 bn (Rs 580 bn) of which private sector is expected to contribute 60%. Projects

worth Rs 61 bn are already under implementation to cope up with increased trade.

With containerized trade expected to grow at a CAGR of 7.3% for next 5 years and

Indian containerized trade reaching 4.6 mn Twenty Feet Equivalent Units (TEUs) in

2006 there is a need for augmenting the CFS/ICD facilities in the country to ensure

smooth handling of cargo.

Expected completion of Golden quadrilateral (2008) and the east-west and north south

corridors will improve hinterland connectivity to ports and inter-port connectivity which

will provide fillip to the increased trade requirements and movement of goods across

country efficiently.


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We should try to develop Indian ports as trans-shipment hub for South East Asia which

will help India to increase its share in world trade. Transshipment hub receives bulk

cargo, which contains cargo of various parties combined together for ease of transport to

save costs. At the transshipment hub the cargo is split up into smaller cargo and then

again redistributed to their final destinations. This is a value added activity and has huge

business and growth prospects. Indian ports have huge potential to be potential trans-

shipment hub for South East Asia. The vision is to develop Vallarpadam/ JN

Port/Tuticorin port as a substitute for Colombo and Singapore port for Indian

transshipment cargo.

Increasing Indo-global trade due to cost competitiveness, booming domestic consumption

on back of increased disposable income along with increased government spend on

infrastructure are driving the demand for specialized logistics service providers.