Addressing India’s high logistics costs

It is a universally acknowledged fact that the cost of logistics is very high in India. Some estimates put it at about 13 per cent of GDP, which is higher than the US (9) and Germany (8). A study by Assocham-Resurgent India (2016) stated that the country can save $50 billion if logistics costs reduce from 14 per cent to 9 per cent of GDP. Reduced logistics costs would bring down prices of products.

Transportation services form a third of the cost of a logistics chain. Improving transportation would require the coordinated development of railways, roads and waterways. Roads carry about 60 per cent of the freight cargo in India. As rail transportation is more energy efficient than road, movement of goods via the road-cum-rail mode could reduce logistics costs considerably.

To divert traffic from road to ‘road-rail-road’ mode, the Railways would have to take a number of steps in coordination with road operators and container companies. The actions to be taken by the Railways could include: (i) designing a suitable wagon for the “Roll on Roll off” trains, which would move trucks on flat railway wagons on electrified routes for a major part of their journey; (ii) identifying routes where high- value and time-sensitive cargo can be moved efficiently; (iii) providing advance information to the industry about routes where additional capacity is being created; and (iv) providing a guarantee about transit time for the consignment.

“RoRo” trains have been run earlier by the Railways with existing wagons on non-electrified routes. However, the service cannot be operated on electrified routes due to insufficient clearance from overhead traction wires. With accelerated electrification being planned by the Railways, such services need to be run on electrified routes as well.

Reducing a wagon wheel’s diameter to lower the wagon’s height is an option that could be seriously pursued to run such wagons on electrified routes. Most of our wagons have wheels with a diameter of 1,000 mm. The Railways already has special wagons for containers (BLCA wagons), which have 840 mm wheels. A similar design may be evolved for carriage of trucks. Though discussions have taken place, an appropriate wagon is yet to be designed. Finalising a suitable design would be an important first step.

Thanks to the higher fuel efficiency of railway movement, a back of the envelope calculation suggests that if 45 trucks with a gross weight of 40 tonnes each were moved by a train over 1,000 km, the total saving in fuel costs would be ₹3 lakh. Movement by rail would be faster and the saving in lower transport and inventory costs would benefit the consumer. The example is illustrative, but points out the huge potential which exists.

The earning per tonne from a container is higher for coal, which constitutes 50 per cent of the Railways’ freight traffic. In the last four years, the earning per tonne from container traffic has grown at a CAGR of 8.3 per cent as compared to 3.8 per cent from coal. This is a pointer to the higher revenue which can be earned from moving high-value and time- sensitive cargo. However, compared to a container or “RoRo” train, a coal train carries 1.5 to 2 times the volume of cargo, yielding higher revenue per train.

Hence, there would be a trade-off between running the two types of trains. IR would prefer to carry higher cargo volumes on congested routes while the “RoRo” and container trains may be put on less congested routes.

To increase volume of cargo carried per container train, the Railways has already announced a pilot project for running double- stack low-height containers (6 feet 4 inches tall, instead of the normal 8.5 or 9.5 feet) on electrified routes which would increase the cargo carried by 55 per cent. Similarly, heavier trailer trucks could be carried on railway wagons. Routes for running these trains would have to be identified and advertised.

The Dedicated Freight Corridors (DFC) of the Railways was designed mainly for heavy haul cargo such as coal. With the Government’s present emphasis on reducing use of fossil fuels and increasing the share of renewable sources in power generation, the earlier traffic projections of most of the DFCs are likely to undergo a downward revision.

This opportunity should be used for rapid transportation of containers and “RoRo” traffic on DFCs. Routes on which new train running capacity is added could also be considered for containers and “RoRo” trains.

The Dedicated Freight Corridor Corporation of India (DFCCIL) should plan to develop logistics parks as points for aggregation/disaggresgation of cargo for movement by DFC. Logistics parks planned by the Ministry of Road Transport & Highways would also be ideal points for interface of cargo between road and rail modes.

These parks should ideally be developed along the alignments of the DFCs and corridors identified by the Railways for movement of containers and “RoRo” trains. Cargo moved by inland waterway transportation (IWT) would provide similar opportunities.

A container train from Delhi to Mumbai travelling on DFC could cover the distance in 24 hours. A truck would take minimum of three days. The Railways could provide transit guarantees at least for the traffic moving on the DFCs. This would create customer confidence and a substantial volume of road traffic could migrate the to “road-rail-road mode”.

The Railways plans to open new routes and add new lines to existing routes. To generate customer confidence, it would be worthwhile to announce additional train running capacity added to these routes and the approximate transit time for high value consignments. The present practice of announcing the number of kilometres of new track added each year does not convey the right message to the consumer.

Coordination between various ministries and a proactive role on the part of the Railways could bring about a rapid reduction in the logistics cost to the economy.

The writer is former Additional Member (Traffic), Railway Board. The views are personal