The government’s emphasis on strengthening the transportation sector has provided an impetus to the Indian logistics sector. Relying on its four segments of rail, road, sea and air cargo, the sector is expected to go through some major changes with the government’s new regulatory measures. The modal mix of freight transportation in India is highly skewed towards roads, which has a share of 60 per cent. This is followed by railways at 26-27 per cent, and then waterways and airways at 13-14 per cent each. Taking cognisance of this, the government is planning to shift the modal shares to the international benchmarks – 45-50 per cent for railways, 25-30 per cent for roads and 20-25 per cent for waterways. Aligning government policies and initiatives is instrumental helps in creating a clear roadmap for the growth and improvement of freight movement. To that end, the government has undertaken schemes such as the Bharatmala Pariyojana, launched in October 2017, which aims to optimise the efficiency of freight and passenger movement across the country; the Sagarmala, the flagship programme of the Ministry of Shipping, which aims to promote port-led development in the country; and dedicated freight corridors (DFCs), which aim to increase the railways’ freight share. The PM Gati Shakti Master Plan and the National Logistics Policy are being touted as game changers for the logistics sector, with their aim to integrate major government programmes and projects in order to expedite infrastructure creation and significantly reduce logistics costs.
Roadways have to bear different truck loads as well as light and heavy goods carrier vehicles. In terms of revenues and volumes, full truck loads are dominant. The trucking industry has been faring well in the road freight market, with sales of trucks in the 5 to 55 tonne category showing strong recovery from pandemic-induced losses. With this upward trend, their sales may surpass 0.5 million units in April 2023, doubling the industry’s turnover in two years. The growing road infrastructure under the Bharatmala Pariyojana is complementing this, with 9,548 km of road length constructed till date. Data from the e-way bill generation system shows signs of quick recovery, indicating growth in commercial vehicle traffic, which has notably risen from 557.8 million in 2018-19 to 616.8 million in 2020-21.
However, it has also been observed that truck productivity in India is low at an average of 300 km per day compared to the global average of 500 to 800 km per day. Fuel efficiency also remains low in heavy duty vehicles, with a consumption rate of 43-45 litres per 100 km. These factors lead to higher fuel consumption and, in turn, high costs. This has pushed the industry to look for better alternatives and adopt more environment-friendly fuel options. Currently, diesel remains the most preferred fuel. However, various alternative fuel technologies such as fuel cells and overhead pantograph-based electrification hybrid systems are being explored. Liquefied natural gas (LNG), compressed natural gas and electric vehicles (EVs) are also getting traction in this sector. On October 21, 2022, Volvo Trucks India initiated its shift towards LNG and began commercial trials of the fuel for its leading tractor category. Meanwhile, BigBasket plans to have a 90 per cent electric fleet by 2024, while Amazon and Flipkart plan to add 10,000 and over 25,000 EVs, respectively, to their delivery fleets by 2030.
India has one of the largest railway networks in the world, with a high rate of track construction for new lines, doubling and gauge conversions. During 2021-22, the railways’ actual construction exceeded the target by 21 per cent, standing at 2,904 km. As of October 2022, container cargo transported via railways has risen by a healthy 17.63 per cent in 2021-22, as compared to the 12.51 per cent growth of the overall container cargo volumes during the same period in the previous year.
Despite this positive trend in rail freight activity, its routes continue to experience high congestion, with 51 per cent of the routes carrying 96 per cent of the traffic. To improve this, the government has launched some important initiatives. On September 7, 2022, the union cabinet approved the Ministry of Railway’s proposal to revise the railway land policy in order to implement the Gati Shakti framework. This will allow long-term leasing of railway land for several activities, including those related to cargo, for a period of up to 35 years, at 1.5 per cent of the market value of land per annum.
Additionally, to boost the segment, Indian Railways (IR) plans to run dedicated parcel trains on specific routes to deliver goods shipped by online marketplaces. The new service could help IR regain some of the non-bulk freight business that has moved to the roadways over the decades. The sector is also eyeing a switch to more sustainable mechanisms, as is reflected in the proposal to gradually shift its passenger and freight operations to aluminium-bodied trains. In October 2022, India’s first freight train with an all-aluminium wagon rake was inaugurated as part of the plan to facilitate large carbon savings. Similarly, in a bid to decrease diesel consumption, as of July 2022, 81 per cent of the broad gauge rail network has been electrified. Furthermore, double-stack container trains have gained momentum in the freight business. The Haryana Orbital Rail Corridor, a new, 126 km long electrified double broad gauge rail line, has been planned between Palwal and Sonipat. Meanwhile, 25 tonne axle load rails have been laid at DFCs for the operation of two-storeyed double-stack container trains carrying loads of 12,000 tonnes.
In the past few years, non-major ports have been leading port traffic growth, exhibiting a compound annual growth rate (CAGR) of 4.29 per cent from 2017 to 2022. Traffic handled at major ports has also shown an increase during this period, at a CAGR of 3.07 per cent. However, for various reasons, Indian ports have not been able to attract enough mainline vessels. This can be attributed to infrastructural inadequacies, high costs, procedural issues, transit delays, lack of certainty due to policy changes, etc. The shipping industry has witnessed a sharp reduction in freight rates, given the impact of the fall in global demand due to the recession in the export market. For instance, freight rates along the India-West Africa route have fallen from $140 per container to $80-90, as of October 2022. Although the rates are still 150 per cent higher than the pre-pandemic levels, the container lines operating to and from India continue to experience the pressure of the reduced cargo volumes. The Russia-Ukraine war, the global economic downturn and port strikes are a few of the factors adding to this volatility.
The government has been focusing on increasing the share of coastal shipping in the total cargo handled at Indian ports. With the Sagarmala programme, coastal traffic witnessed a steep increase of 14.7 per cent in 2021-22 as compared to 2020-21. Furthermore, 213 projects worth Rs 1.38 trillion have been undertaken to enable port connectivity, as of May 2022. Of these, 57 projects worth Rs 209.58 billion have been completed, while 71 projects worth Rs 841.4 billion have been awarded and are currently under implementation. To further address the procedural discrepancies, on August 13, 2022, the Ministry of Ports, Shipping and Waterways and the Ministry of Ayush launched the International Federation of Freight Forwarders Associations’ Bill of Lading (FBL). Freight forwarders can now easily issue a secured digital FBL using everyday tools. This will also ease the issuance process by eliminating double data entry.
The airfreight traffic slumped like other segments in 2020-21, with a decline of 25.7 per cent over 2019-20 numbers. However, it gained a noteworthy pace in 2022, with the total airfreight traffic during April-July 2022 rising by 8.8 per cent compared to April-July 2021. Although air cargo movement is mostly unidirectional, there has been balanced demand for export and import via airways in India this year, as per the International Airline Group.
In India, the bulk of air cargo is handled as belly cargo in passenger aircraft, whereas in other countries most of the cargo is transported in dedicated freighter aircraft. However, there has been a rise in the number of dedicated aircraft from 8 to 28, and it is expected to grow further, having demonstrated stable operations during the pandemic compared to the passenger segment. In fact, in July 2022, an all-cargo airline, Pradhaan Air Express, received its first converted A320 freighter aircraft as part of its plan to operate a fleet of four planes by 2023. Similarly, in September 2022, IndiGo inducted its first dedicated cargo aircraft with a carrying capacity of 27 tonnes. However, cargo operations are currently facing challenges due to the restrictions on using Russian and Ukrainian airspace, coupled with an increase in freight and fuel rates.
Some of the regulatory policies have been directed towards boosting air cargo growth and evening out their regulatory hurdles. For instance, in December 2021, a parliamentary panel suggested that cargo handling rates be standardised at Indian airports, and that freighters get dedicated parking bays. It also emphasised the resolution of all air cargo tariff disputes through the Airports Economic Regulatory Authority. Moreover, the segment is switching to sustainable growth. There are ongoing plans to launch zero-carbon electric cargo planes by 2024, under a memorandum of understanding signed between SpiceXpress and the aviation start-up division of Pifore in December 2021. Drone delivery is another area that will elevate air cargo services in the future. Zypp Electric partnered with TSAW Drones in January 2022 to add drone delivery for last-mile delivery services. It will deploy 200 drones for this. The overall drone package delivery market in India is projected to grow from $528 million in 2020 to $39 billion by 2030, as per industry reports.
Several significant projects are under way in the four transportation segments. These include major expressways, greenfield access-controlled highways, synergy in inland waterways under Bharatmala Pariyojana Phase II, and upcoming air cargo facilities at greenfield airports such as Navi Mumbai, Mopa and Jewar. DFCs such as the ones connecting Kharagpur to Vijayawada and Bhusaval to Nagpur, Kharagpur and Dankuni, present a mammoth opportunity for various stakeholders including heavy equipment suppliers, steel suppliers and cement suppliers. The government also plans to develop 300 Gati Shakti cargo terminals over the next five years to facilitate freight consolidation. Meanwhile, the Maritime India Vision 2030 for the waterways segment aims to bring India to the forefront of the global maritime sector. With an overall investment of Rs 3,000 billion- Rs 3,500 billion across ports, shipping and inland waterways, it will help unlock over Rs 200 billion worth of potential annual revenue for Indian ports.
The transportation sectors are expected to transition to a more digitally equipped and sustainable future. With IR setting a target of 100 per cent electrification by 2023-24, it will be the first major railway system in the world to have a fully electrified broad gauge railway network of such size. All companies that use two-wheelers for deliveries in Delhi will transition 50 per cent of their fleets to electric by March 2023, and 100 per cent by March 2025. The digitalisation initiatives under the National Logistics Policy through platforms such as Integration of Digital System, Unified Logistics Interface Platform, and Ease of Logistics Services, will contribute significantly towards integrating the varying digital systems of different departments such as road transport, railway, customs, aviation, and foreign trade and commerce, and thus help in maintaining compatible standards