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Govt should take steps to end the unidirectional flow of cargo says FIEO

The Federation of Indian Exporters Organisation has urged the government to implement long and mid-term strategies to ensure simultaneous flow of cargo from the Ports to manufacturing or consuming centres to end the chronic unidirectional cargo flow one of the key contributors to increased Logistics cost hampering the competiveness of our exports.

Addressing the One day conclave titled Cargo connexions 2019 at Coimbatore last week the past president of the FIEO Dr M Rafeeque Ahmed said majority of the Industrial clusters in India have EXIM imbalance resulting in unidirectional cargo flow.

This leads to an overall increase in the cost of transportation, since freight operators are trying to recover the fixed cost involved in returning without any load.  This issue need to be address by implementing various long and mid-term strategies to have simultaneous flow of cargo.

As compared to leading maritime nations, EXIM containers in India travel a distance of 700-1,000 km between production centres and ports as compared to 150-300 km in leading maritime nations.

This leads to an increase in Logistics cost thereby impacting the overall competitiveness of the nation. The Port based industrialization model offers economies of scale by means of a large consolidation opportunity.

This also helps in achieving reduction of logistics cost and time for movement of EXIM and domestic cargo thereby leading to enhancement of global competitiveness of Indian manufacturing and maritime sector. It is estimated that one day of delay in goods shipment leads to 0.8 per cent increase in overall cost while a week’s delay may lead to addition of five to six percent in overall cost of goods

For India’s manufacturing sector to be relevant in a highly integrated global market where MNCs operate across the world by taking advantage of the local efficiencies, it is imperative that the products manufactured in the country are globally competitive.

In a globally competitive scenario, Operational and Logistics efficiency determines the location and movement of goods. Freight and logistics networks are realigning according to the location of production and consumption activities, creating the hub-and-spoke models that are needed to improve freight and logistics performance.

While Major ports in Maharashtra, Gujarat, Orissa and West Bengal are increasingly congested, the utilization of Southern ports have remained very low except Ennore Port, indicating potential for attracting more cargo as well as scope for Economic Development in the hinterland they serve.

The Southern part of India consisting of Andhra Pradesh, Karnataka, Kerala, Tamil Nadu and Telangana states; contributes 29 per cent to India’s GDP as of 2016-17 Tamil Nadu is the highest contributor of GDP amongst the South India states followed by Andhra Pradesh and Telangana region combined.

The South India Coast is served by six Major ports. The Ennore port in Tamil Nadu is the first corporatized Major Port of India. Besides these, Vallarpadam, Kattupalli, Krishnapatnam, Gangavaram and Kakinada are the emerging Non-Major ports in the region. 

The cities like, Tirupur, Coimbatore, Erode, Madurai and Trichy are mainly depending onTuticorin port. Products like Textiles, Readymade, Cotton, Yarn, Engineering products and agro and allied products etc., are being exported from these cities. Apart from exports, as the cotton and textile, Metal, etc., inputs for the major inbound traffic to this highly industrialised area of Tamil Nadu, are major attraction for logistics sector is tremendous pressure on the existing roads of the state. 

Hence there is an urgent need for providing necessary infrastructure and linkages for Coastal Shipping which also help the industry to reduce logistic costs. Coastal shipping plays an important role in the development of the domestic industry and trade due to its environment-friendly, cost effective and fuel-efficient services. It is highly relevant for India, since the country has a long peninsular coastline. However, coastal shipping accounts for hardly 7 percent of the overall cargo movement in India which is significantly low compared to other maritime nations. 

With emergence of manufacturing hubs in India under “Make In India” Programme, there would be requirement of efficient multi-modal logistics network connecting ports to manufacturing as well as consumption centres. 

Port modernization is another important aspect to be targeted to debottleneck congested ports and augment cargo handling capacities of existing ports. Inadequate port connectivity is another issue which results in port congestion as well as increased logistics cost and transit time for shippers. India’s logistics cost of 19 per cent of its GDP against 10-15 per cent of other leading maritime nations is a key concern to be addressed. 

The National Highways accounting for 2 per cent of road network carry 40 per cent of road traffic.  Last Mile Connectivity Infrastructure such as approach roads and rail sidings are not sufficient to meet the growing demand of cargo. This is resulting in higher transit time for the cargo. For example, Chennai, the largest container handling port on the east coast, lacks dedicated access roads resulting in severe traffic congestion and delays.

Multimodal integration is essential for improving the competitiveness of the logistics sector in India. Freight logistics, comprising of transportation, warehousing and value-added services (VAS) spanning across road, rail, sea, and air, is an enabler and a catalyst for economic growth. The improvement in India’s rank from 54 to 35 on the World Bank-driven Logistics Performance Index, and in the Ease of Doing Business rankings, show that the country is heading in the right direction. However, there is still need for focused action.

Leading maritime nations in the world have already leveraged their coastline for economic development of the nation. For instance, Port of Rotterdam contributes to 3 per cent of Netherland’s GDP while Port of Houston supports 9% of the jobs in the state of Texas. China is another example of port based logistic developed which helped industries tremendously. I am sure that various initiatives of the Govt. including  Sagar Mala project will help the country to grow leap and bounce. 

India is one of the fastest growing economies in the world. The International Monetary Fund (IMF) has estimated that India would retain the status of fastest growing economy in the coming years also. The Government of India’s flagship programmes targeted towards critical infrastructure creation in terms of ports, roads and rail lines through initiatives such as “Sagarmala”, “Dedicated Freight Corridors”; boosting manufacturing output through “Make in India” programme and providing for requisite skilling of personnel to complement manufacturing sector under “Skill India” are expected to fuel this growth further. 

As per the Economic Survey 2017-18, India’s logistics industry which is worth around USD 160 billion is likely to touch USD 215 billion in the next two years. The sector provides employment to more than 22 million people has grown at a compound annual growth rate (CAGR) of 7.8 per cent during the last five years and will grow at a CAGR of 10.5 per cent over the next 5 years. 

In terms of Improving India’s Global Linkages, in 2017, India’s logistics performance improved from 54 to 35 under World Bank Logistics Performance Index (LPI). The government expects the Indian logistics sector to grow to $360 billion by 2032 from the current $115 billion.

Dr Ahmed had a word of appreciation for the Customs Department which have undertaken lot of structural changes in the recent past helping the country to score higher is easy on doing business. Single Window Interface for Facilitating Trade (SWIFT), AEO, DPD, e-Seals RFID based cargo tracking system, etc have been introduced very efficiently within very short span of time and I would like to congratulate Chief Commissioner and his team of officers for taking all pro-active steps towards facilitating the trade.

FIEO is partnering with Govt of India for pushing various reforms and policies towards improvement of logistic sector and to focus on the need for coordinated infrastructure development in the multi-modal logistics sector and to attract global investments. I am sure that today’s program will be focus on potentials of this sector for overall growth of this region and lay road map for efficient infrastructure for supporting dynamic manufacturing sectors of this region.

 

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