Do you know how many times our Finance Minister Arun Jaitley uttered the word ‘Infrastructure’ while presenting the last Union Budget in July? Take a guess. 5? 10? 20? No – 33! If anyone ever wanted proof of just how important infrastructure is to an economy’s growth, this was it. And coming from the top General of Prime Minister Narendra Modi’s brigade, whose entire election campaign was centered on development, it also highlighted that development and growth cannot be divorced from infrastructure. For, infrastructure leads to efficiency, minimises wastages, saves time and above all, improves human equity. So, while the Modi government tries to fix India’s infrastructural woes, The Dollar Business decided not just to write a few words on India’s logistics industry and offer it the usual lip service, but honour top companies in the sector, who grapple with problems day in and day out – be it congestion at ports, airports and roads, slow and infrequent trains, high real estate prices that has made setting up a warehouse next to impossible, power outages that have turned cold storages into white elephants, or non-existent inland waterways – but still continue to shoulder on their responsibilities, without much of a complain.

A report published by India Brand Equity Foundation (IBEF) exactly a year back pegs the size of the Indian logistics sector at $130 billion. This means it is substantially bigger than even India’s IT sector! And this figure doesn’t even take into account the role the sector plays in India’s merchandise trade. But when was the last time you saw the CEO of a large logistics company on television? When was the last time you read about what’s crippling Indian ports? Can you even name all of India’s major ports? The problem, probably, is the unorganised nature of the sector in India, which has made getting even crucial data really difficult; lack of enough listed companies, which has made investing in logistics companies difficult for the average investor; dominance of the public sector when it comes to ports and rail, which has killed competition; and of course, general apathy because of some unexplainable reason.

Highway to hell

A by-product of not talking much about logistics companies means that their problems are, often, overlooked. For example, during our interaction with Harpreet Singh Malhotra, Chairman & Managing Director, Tiger Logistics, we learnt that for a vehicle that his company buys for Rs.18.3 lakh, he pays over Rs.4.5 lakh in taxes per annum! Yes, four years of taxes for a vehicle is higher than the cost of the vehicle. While one might argue that this figure includes excise duty on fuel, it doesn’t take away the fact that this is just too high, by absolutely any standard. How can we expect transporters to offer us quality service and competitive prices, if they pay taxes as high as this? Such high taxes also mean that they have to be passed on to the end-user, thereby inflating prices and reducing competitiveness of our goods. At the same time, who hasn’t seen the serpentine queue of trucks at state boundaries? Have we spent enough time to ponder over the reasons for those queues? More importantly, how can our goods stay competitive if our road liners face so many delays?

Burning train

While we take pride in Indian Railways being the largest employer in the country and are also aware of the recent improvements in the passenger services, how often do we think about the problems of logistics companies that depend on Indian Railways’ rails to move containers and bulk cargo to and from ports? Do you know it’s just been eight years since the government ended Container Corporation of India’s monopoly over container movements by rail? There’s also the preposterous aspect of freight charges in India being very high because Indian Railways needs that money to subsidise passengers! This idea has been so ingrained in our psychology that we have even stopped thinking that this is wrong. You cannot rob Peter to pay Paul. And then expect Peter to provide good services to Paul at competitive prices!

Crash landing

If one can write about the issues with Indian Railways for a few pages, one can, probably, write an entire book on Air India. Since, we don’t have that luxury, let’s push the Maharaja aside. One of the biggest issue that has crippled the air cargo sector in India is the high, extremely high Value Added Tax (VAT) of Air Turbine Fuel (ATF), which can go as high as 30% depending on the state. While this is not a surprise in a country where petrol/diesel prices get inflated by, at times, 80% because of taxes, it is the single biggest hindrance for air cargo operators. The problem gets accentuated by the fact that a lot of the major players in this sector are large MNCs like DHL, FedEx, etc., who are aware of global best practices and find the tax structure in India, extremely regressive. Apart from high taxes, there’s also the issue of congestion at air ports, which leads to massive delays in takeoffs and landings, and leads to wastage of fuel.

 

No EX or IM if no port

When it comes to ports, while the government has done the right thing by opening up the sector to private players, which seems to have brought in the positives that increased completion is supposed to bring in, do you know that when it comes to container traffic, not a single Indian port comes up among the top 20 in the world? Do you know JNPT – by far the preferred choice of Indian exporters and importers – ranks in the 30s? [Check out the World Shipping Council’s 2014 ranking of the ‘Top 50 World Container Ports’.] And more importantly, have we ever wondered why this is the case? In our several interactions with exporters, importers, ship liners and port authorities, the key takeaways have been the lack of draft at several ports to handle big capesize vessels, lack of administrative autonomy at major ports and of course, high fuel cost. In fact, the best data point to answer why China is what it is and why India isn’t, is the fact that seven out of the top 10 ports in the world are located in China and as mentioned before, there ain’t a single Indian port in the top 30!

Where House?

If one thought these – poor roads, rails, ports and airports – are all that Indian logistics companies suffer due to, one can’t be more wrong. For, archaic land acquisition laws, rampant speculation in land and the involvement of Black Money have paralysed Indian warehouses. There’s also the never-ending power crisis, which has ruined the economics of cold storages and several other specialised warehouses. Have we ever thought if a cold storage has to be operated by using over-taxed and high priced diesel, how on earth can an average exporter/importer pay for its services? And if exporters and importers can’t use the services of cold storages, how can they stay competitive in international markets?

Unnamed Child

The most shocking aspect of the apathy towards India’s logistics sector is the fact that it’s not even considered an industry! This lack of ‘industry status’ has meant there is no standardisation, no proper regulation and no particular government department in charge of policymaking for this sector. This has also made the banking industry shy away from logistics companies in India, which has pushed borrowing costs high, further reducing the competitiveness of the industry.

 

For Acche Din

Having pointed out most issues that have been a thorn in the flesh of India’s logistics companies, let’s talk a bit about the road ahead. Having come to power on the development plank, there’s no way the Modi government can/will afford to let the sector down. In diesel price deregulation and India’s Civil Aviation Minister urging state governments to rationalise VAT of ATF, we have two pieces of evidence that the Centre is serious about issues that are grappling the economy, growth in exports, and in turn the logistics industry. At the same time, one has absolutely no doubt that with a bit of buoyancy in the economy, matters like containerisation can only improve. Moreover, it’s just a matter of time before GST becomes a reality, thereby giving Indian logistics companies, more than their peers in any other industry, a much-needed breather. And given that they are already battle-hardened, it’s not difficult to imagine the highs they will soar to, once they have the ammo.

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Final Standings

 

Presenting to you, The Dollar Business Logistics 50 – the most authoritative, in-depth and impartial survey on the top logistics companies in India. The exclusivity edge – during the making of the survey, TDB Intelligence Unit didn’t cater to just the punter on the street or rely on the unreliable nature of perceptions floating about. The study is neither biased towards Indian companies nor towards MNCs. Most importantly, every effort was made to include every element of the logistics business that is crucial to the success of India’s EXIM trade. Why? Simple – because we know, without these companies, India’s export targets will just remain targets!

Rank	Company	Turnover	Fleet*	Geographical Spread	Manpower	Technology	Clientele	Warehousing Capability	Efficiency	Value Added Services	Total
1	Maersk	5.4	18.3	23.7	1.0	6.9	4.8	7.4	13.7	10.0	91.1
2	UPS	5.4	18.3	21.5	2.0	8.2	4.8	7.4	9.1	10.0	86.7
3	TNT Express	5.4	14.3	21.5	3.0	7.4	4.8	7.4	11.1	10.0	84.8
4	DHL	4.1	15.8	25.8	3.0	5.7	4.8	7.4	9.1	8.5	84.1
5	DB Schenker	4.1	11.4	23.7	4.0	5.3	1.8	7.4	13.0	9.0	79.6
6	CMA CGM	5.4	15.8	19.4	2.0	4.9	4.8	5.6	11.1	7.8	76.6
7	FedEx	5.4	13.6	23.7	4.0	5.3	1.2	3.7	11.1	7.5	75.4
8	Rhenus Logistics	5.4	13.4	19.4	3.0	5.3	2.4	3.7	13.0	8.5	74.0
9	Hyundai Logistics	4.1	15.0	19.4	1.0	5.3	4.8	1.9	9.1	10.0	70.5
10	Agarwal Packers & Movers	2.7	9.3	25.8	4.0	4.5	2.4	4.6	11.1	4.7	69.0
11	Gati	4.1	12.2	12.9	4.0	5.7	3.6	7.4	9.1	10.0	69.0
12	Mahindra Logistics	4.1	8.8	8.6	4.0	6.1	4.2	7.4	14.3	10.0	67.5
13	DACHSER India	5.4	14.5	19.4	2.0	4.1	1.2	2.8	9.1	9.0	67.4
14	Agility Logistics	2.7	12.1	19.4	3.0	5.3	1.2	5.6	9.1	8.5	66.8
15	Allcargo Logistics	2.7	8.8	23.7	4.0	4.5	2.4	3.7	9.1	7.8	66.6
16	Transport Corporation (TCIL)	4.1	9.3	19.4	5.0	3.3	3.0	5.6	9.1	7.8	66.3
17	Hanjin Shipping	4.1	14.2	17.2	2.0	3.3	3.0	4.6	11.1	6.7	66.1
18	Blue Dart	4.1	5.9	12.9	4.0	4.5	4.8	7.4	13.0	8.8	65.3
19	Reliance Logistics	4.1	12.2	10.8	2.0	5.7	1.2	7.4	11.7	10.0	65.0
20	Safexpress	4.1	9.7	12.9	3.0	5.7	3.0	7.4	9.1	9.5	64.3
21	Perma Shipping Line	5.4	15.8	12.9	2.0	4.1	4.8	4.6	8.5	5.5	63.5
22	Container Corporation of India	5.4	11.0	10.8	3.0	4.1	4.8	7.4	8.5	7.8	62.6
23	TVS Logistics	4.1	8.8	12.9	4.0	4.5	3.0	5.6	9.1	8.8	60.7
24	DTDC	2.7	5.4	25.8	4.0	4.1	3.0	1.9	9.1	4.7	60.7
25	Om Logistics	2.7	7.6	21.5	2.0	4.1	2.4	7.4	9.1	3.5	60.2
26	First Flight	2.7	5.4	25.8	4.0	2.0	3.6	2.8	9.1	4.7	60.1
27	Essar Logistics	4.1	9.6	10.8	3.0	4.5	2.4	4.6	9.1	10.0	58.0
28	Abhi Impact Logistics	1.4	11.0	12.9	2.0	4.5	1.2	2.8	13.0	8.5	57.1
29	DIESL	2.7	8.4	10.8	2.0	4.5	2.4	5.6	9.1	10.0	55.4
30	Hindustan Logistics	1.4	13.4	17.2	1.0	2.0	1.2	1.9	9.1	7.5	54.6
31	TM International Logistics	4.1	7.1	12.9	2.0	2.0	2.4	4.6	9.1	9.5	53.7
32	Snowman Logistics	1.4	8.8	8.6	3.0	5.7	1.2	5.6	11.1	8.3	53.6
33	EXL Express & Logistics	1.4	8.4	10.8	2.0	3.3	1.8	7.4	9.1	9.0	53.0
34	Shreyas Shipping	2.7	8.0	17.2	2.0	4.5	1.8	1.9	9.1	5.7	52.8
35	Aegis Logistics	5.4	7.6	6.5	2.0	4.1	3.6	4.6	9.1	10.0	52.8
36	ABG Infralogistics	1.4	11.0	8.6	2.0	4.5	1.8	6.5	9.1	7.8	52.5
37	TKM Logistics	2.7	14.1	12.9	1.0	1.2	1.2	1.9	11.1	6.0	52.0
38	Transocean Express Logistics	1.4	7.6	12.9	2.0	4.5	1.8	2.8	9.1	9.5	51.5
39	Atlas Logistics	2.7	7.6	15.1	2.0	4.1	1.2	2.8	11.1	4.7	51.1
40	Sical Logistics	2.7	9.3	8.6	2.0	3.3	2.4	5.6	9.1	7.8	50.6
41	Cargomen Logistics	1.4	11.0	12.9	2.0	2.0	1.8	1.9	9.1	8.5	50.5
42	Patel Integrated	2.7	7.1	12.9	4.0	4.5	1.8	4.6	9.1	3.5	50.2
43	Global Express Services	1.4	7.6	17.2	2.0	3.3	1.8	1.9	9.1	5.9	50.0
44	Arshiya	2.7	6.7	10.8	2.0	3.3	1.8	7.4	9.1	6.0	49.7
45	IRC India	1.4	11.4	10.8	1.0	4.5	1.2	1.9	9.1	8.5	49.6
46	Interem	1.4	8.4	10.8	2.0	3.3	1.2	1.9	13.0	7.5	49.3
47	Tiger Logistics	1.4	8.8	17.2	2.0	2.0	1.2	2.8	9.1	4.3	48.8
48	Atlas Shipping Services	4.1	5.9	12.9	2.0	4.1	1.2	3.7	9.1	4.8	47.7
49	Aqua Logistics	2.7	10.1	6.5	2.0	4.5	1.8	1.9	9.1	7.8	46.2
50	Chartered Logistics	1.4	10.8	6.5	2.0	4.5	2.4	1.9	9.1	6.4	44.8

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Alphabetical listing Top 10: Parameter wise

Since the logistics industry is extremely diversified, The Dollar Business decided to identify the top companies as per each of the nine parameters that we used to arrive at the final list of top 50 logistics services providers in India. Here’s is an alphabetical listing of the top 10 companies as per each of the nine parameters

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Methodology

 

 

 

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“Navratna status will allow us to take up bigger and ambitious projects” Anil K Gupta, Chairman & Managing Director, CONCOR

Container Corporation of India Ltd. (CONCOR) has recently been awarded the Navratna status. And Anil K. Gupta, its Chairman and Managing Director, is the man on cloud nine. The Dollar Business caught up with Gupta, not only to know what the newly conferred status means to CONCOR, but also to discuss the issues hampering the growth of containerisation in India

Interview by Sachin Manawaria | The Dollar Business

TDB: What is your take on the way the logistics sector in India has evolved over the years?

Anil K. Gupta (AKG): The Indian logistics sector has been witnessing buoyant growth and will continue this momentum in the coming years. The demand for logistics services is largely fueled by consistent growth of the economy. This growth is likely to remain high due to expected high growth in Indian economy in the years to come. Infrastructure impetus, in the form of more EXIM & domestic terminals and improved rail and road connectivity, has given a big boost to the growth of the sector. It will get a further boost once the GST is implemented.

TDB: Being India’s top container cargo company, tell us why containerisation in India continues to be low?

AKG: Containerisation in India is around 50%, whereas in developed countries, it is 75-80%. It is growing in India steadily and is expected to grow till it reaches international levels. The growth of containerisation is sure to get a further boost with the impending growth of the Indian economy in years to follow.

TDB: Until 2006, you had a monopoly in India. How do you think competition has affected you?

AKG: CONCOR has always believed in healthy competition. In fact, we had introduced competition by having a joint venture container-freight station (CFS) at our ICD in Dadri way before 2006. As a matter of fact, competition has helped us in adopting very aggressive marketing strategies, which should now help us in capturing large volumes due to imminent growth anticipated over the next three to four years in the EXIM business. It has also given us time to strengthen our multi-modal infrastructure and create larger capacities to cater to higher growths.

TDB: In what ways will the Navratna status help CONCOR? Have you already started reaping the benefits from this?

AKG: With CONCOR having got Navratna status, its board can now give sanction to projects of higher value that will, no doubt, expedite the process. We are quite enthusiastic about the Navratna status and are hopeful to have increased presence overseas very soon. Navratna status will allow us to take up bigger and ambitious projects, which is the need of the hour, especially considering the challenges and opportunities that upcoming western dedicated freight corridor (DFC) is going to provide for all container operators.

TDB: How far do you think you are from achieving your stated objective of being able to provide total logistics solutions to your customers? What steps are you taking to help enable this?

AKG: CONCOR is already providing rail transportation from gateway ports to its terminals and between its terminals and gateway port. For providing last mile/first mile connectivity, we have formed a joint venture with Transport Corporation of India Ltd. (TCIL). We have already started providing road vehicles to some customers through this JV. Apart from this, at few terminals, we are providing local stuffing/de-stuffing services to the shippers’ premises through contractors.

TDB: How important is technology in your scheme of things? Give us a sense of the investments CONCOR has made on the technology front.

AKG: CONCOR always believes in providing state-of-the-art technological inputs at its facilities. We have deployed the latest container handling equipment like RTGs/RMGs and reach stackers at our terminals. All commercial and operational activities at our terminals are computerised and all terminals are linked through a nationwide network. We have got a robust IT network and we use this to provide various customer-friendly on-line services like container tracking on our website, SMS based container tracking, e-filing etc.

TDB: There is an impression that a company of your size doesn’t have the amount of warehousing facilities that it should have. What’s your take on this? Also, tell us about your cold storage subsidiary FHEL.

AKG: At present, there is sufficient warehouse space at our facilities throughout the country to cater to requirements of transit and bonded warehousing. However, we are now keenly looking at the additional requirements of warehousing, which is likely to arise subsequent to implementation of GST and will take timely action to create more space in vantage locations. As far as FHEL is concerned, we are yet to see the desired growth. Currently, we are not planning any extension there. We will do it at an opportune time once the facility stabilises and we are able to achieve our objective of multi-product storage and distribution through the facility.

TDB: Tell us a bit about your capacity expansion plans. Do you think you are in a position to handle additional traffic if India’s EXIM trade sees a sudden jump?

AKG: CONCOR has embarked on an ambitious capacity expansion plan that includes setting up of 15 multi-modal logistic parks (MMLPs). Five of these will be on western DFC. With these, our handling capacity is likely to almost double in the next five years. Then we will be ready to handle additional traffic that EXIM trade and domestic trade is likely to offer to us in the coming years. All facilities are being created with a view to expand capacities and be self-sufficient to be able to provide all logistics services to users under a single roof. While we will be setting up most of these facilities on our own, we will also be open to the PPP model in setting up CFSs, specialised warehousing and private freight terminals in the forthcoming facilities, wherever there is scope for doing so.

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“Industry status will help getting loans easier and much cheaper” - Ramesh Agarwal, chairman, Agarwal Packers & Movers Limited

 

While analysing India’s logistics sector, one cannot not talk about a company which is recognised by the Limca Book of Records for being India’s top mover of household goods. In an exclusive interaction with The Dollar Business, Ramesh Agarwal, Chairman, Agarwal Packers & Movers Limited, talks about what’s crippling Indian roads, and the way out

Interview by Vanita Peter D’souza | The Dollar Business

TDB: You have been one of India’s most prominent logistics companies for nearly three decades. Help us understand how the sector and your company have evolved over the years.

Ramesh Agarwal (RA): Initially, you can say the journey started with zero. We had no idea whether we could capture this market or not. It was a very humble beginning but by the early 2000s, the scenario had totally changed for us. In 2001, the then Prime Minister Atal Bihari Vajpayee had said we will have roads connecting rural India, which further boosted our business. Our business is totally related to roads. More roads will lead to more business (surface transport). During the 90s, we were growing, but we received the needful push only in 2001.

TDB: India is not really known for its logistics infrastructure. What is your perception of Indian logistics sector?

RA: According to me, our infrastructure might not be at par with foreign countries but that doesn’t mean we are not good. However, we should also remember the cost of labour in our country is cheaper in comparison to others. Not everyone in our country is a mechanic or an engineer. They are labourers and we cannot replace them with machines. If in case we do not do that, they all will be unemployed. At least, for the sake of corporate social responsibility, we cannot replace our labourers with machines. Moreover, I believe, there are hardly any infrastructural issues, but the states and the Centre need to start working in tandem. A centralised system will solve issues like toll tax and others, not just for us but for the whole country.

TDB: Logistics industry in India is yet to receive the recognition it deserves. Even though the industry has potential, it lacks attention. What is your opinion?

RA: Indian politics is directly connected to the vote bank. A politician works for only his area as he is concerned about his vote bank. Our drawback is we are scattered all over India. We have more than 50,000 drivers but they do not belong to any particular area. If they had belonged to a particular area, we could have asked our elected ministers to come and develop that zone in exchange for votes. We are not collective as voters and it is immaterial for them to work for us. They do not value us as voters. But when crisis hits the nation and prices of agriculture and other important product rises, they think of us and then our demand rises. Secondly, they treat us like a cow that provides milk. Neither the consumer nor the transporter has ever revolted against this. Even top bureaucrats have never tried to stop this. But now, I have observed new reforms and effective governance are coming in and I am sure things will improve with time.

TDB: As compared to other countries, the Indian logistics industry is not very developed. What do you think is hindering the industry’s growth?

RA: The total revenue earned by Indian surface transporters in FY2013 was around Rs.6 lakh crore and the growth rates are not small. But when a company increases its operations and start growing, government officials start creating hurdles. Even if the industry grows, it is difficult for an individual company to grow. This is because of our government’s systems. There is no honesty in the system and corruption definitely limits growth.

TDB: Some estimates peg the Indian logistics and warehousing sector at about $130 billion. Do you agree?

RA: The total surface transport business is approximately Rs.6 lakh crore (about $100 billion) as of now. The warehousing business is about Rs.76,000 crore (about $13 billion). This figure can go up, but the people’s mindsets need to change. Many people in Haryana still prefer to keep their goods/grains in an open yard covered with tarpaulin. They do not want to pay the rent for a warehouse. But, if we tell them that destroying grains is a crime, they will start paying up and using warehouses. New rules and conscious buyers are slowly helping change the mindset of suppliers and producers.

TDB: What do you think the government should do to help the growth of the logistics sector in India?

RA: It is only you and me who call logistics an industry. It is not an industry. The government is yet to recognise it as an industry. Who are we? Neither are we an industry, nor are we infrastructure. But now they are thinking of certifying us as an industry and once that happens, bankers will approach us. Every industry has its own norms, but being an industry, we do not have any norms. Bankers charge us whatever interest rates they like. Once we are officially tagged as an industry, getting long-term loans will become easier and cheaper. Further, I believe that multiple departments in the government will soon be converted into a single window clearance system and maybe then we will spend less time in government offices.

TDB: Talking about your company, you claim that your services range from catering to the needs of a studio apartment to a corporate house. Please tell us how difficult it is to customise your services for such a wide range of consumers.

RA: Customisation was a problem 15 years back. Our in-house think-tank works only to customise services for customers. We have a wide range of containers for relocating houses. They include one-room-kitchen and one, two, three, etc. bedroom containers. Such containers are named as trucking cubes. We send trucking cubes as per the customer’s requirement. The customer can then go to his new location, take his own time to select a house, renovate the place, perform pooja and then fix a date and calls us. Within four hours, we will be at his/her gates.

TDB: You have a presence in over 170 countries. Which countries contribute the most to your revenue? Does your clientele in other countries comprise just expat Indians and Indian companies or locals as well?

RA: Dubai contributes the most to our revenue followed by Singapore, US, Australia and then, Europe. Mostly, Indian expats and companies are our customers.

TDB: Your Company is mostly known as a domestic transportation company. How difficult/easy have things been for your EXIM division?

RA: Our clients, who used to enjoy our services locally, would ask us why we are not starting international operations. We lacked international knowledge. But this was the case four years back. That’s when we hired a team, which had experience in exports but did not have much business to do. And today, this team has become a threat to our peers.

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“With an eye on the post-gst scenario, we have developed large warehouses in the four metros” - Vikas Anand, Managing Director, DHL Supply Chain India

 

Bringing the best global practices to the Indian warehousing sector is DHL Supply Chain. In fact, the company plans to invest heavily in developing large warehouses and multi-client sites across India over the next few years. In an exclusive interaction with The Dollar Business, Vikas Anand, MD, DHL Supply Chain India, explains the logic behind this strategic decision

Interview by Sisir Pradhan | The Dollar Business

TDB: In recent times, DHL has been focusing a lot on developing large warehouses and multi-client sites. Give a brief outline of the benefits of them to a user.

Vikas Anand (VA): In 2012, we prepared a roadmap to strengthen our presence in India; to serve our clients better; improve our efficiency; and take the logistics sector in the country to a new level. Under this programme, we earmarked four key areas to realise our vision, one of which was multi-client sites.

In India, most of the warehouses have an average size of less than 20,000 square feet, whereas the size of our multi-client warehouse in Mumbai is about 4 lakh square feet. The same in Gurgaon is about 3 lakh square feet; Pune is about 2 lakh square feet and the latest one in Bengaluru is built on an area of 1.4 lakh square feet. Apart from being large in size, these cargo hubs have very high rooflines where unlike general warehouses, which store goods on the floor, goods are stored vertically in specially created racks. Most of our multi-client warehouses are about 14 meter in height. Moreover, the multi-client sites have been built as per international specifications and many minute details of warehousing requirements have been taken into consideration – like warehouses with very strong flooring to store even heavy payloads, rest rooms for drivers, security systems and fully-controlled environments.

We are also expanding our space in Bengaluru and setting up new sites in Ahmedabad, Chennai and Kolkata. Once tax considerations are behind them in post-GST, companies, instead of running small warehouses at specific locations, can consolidate their inventory at one place and bring down the inventory holding cost. So, our multi-client sites will also help companies to serve their customers better. The other benefit of multi-client site is that all goods inside a warehouse is managed by one contract manager. Hence, the cost of common services like housekeeping and security comes down. Moreover, for many clients, there is a specific period in a year where they need extra manpower to meet high market demand during that period of time. In such scenarios, due to our pool of trained manpower, we allow our clients to leverage our resources because lean period for one customer could be the peak period for another. This is the reason why these warehouses are being picked up very fast by large corporate houses.

TDB:What are the main challenges before India’s logistics sector in general and the warehousing sector in particular?

VA: The main challenge in our space is that the quality of warehousing, which is the most significant aspect of a distribution system, is of very low standards. The overall design and smaller sizes also add up to the inventory cost. This is the reason why we are investing in warehouses. The other challenge is transportation. Most of the long-haul transport vehicles in India have very low carrying capacities. This is why we are investing in large capacity long-haul vehicles. On an average, the waiting time at state borders is six-seven hours and then there are waiting at toll gates as well. Compared to western countries, where cargo carriers move at an average speed of 60-70 kmph, in India they move at 30-40 kmph, which delays delivery of cargo. All this adds up to the overall logistics cost. The recently launched e-toll collection system is one positive step towards bringing down average transportation time in the country.

Moreover, there is a scarcity of quality manpower in the sector. Most of the companies in India hire quality manpower for manufacturing, however when it comes to logistics and warehouse management they don’t care about quality since they consider this to be non-core to the overall production cycle. This is the reason why we are putting in a lot of effort on manpower training. The fourth challenge for the sector is application of information technology (IT). In India, the use of IT for inventory and warehousing management is still very low and things are managed manually, which means the efficiency level remains low and a lot of time is wasted.

TDB: Now that you have established a strong domestic presence after acquiring Blue Dart, are you planning to enter the bulk cargo handling segment as well?

VA: In the last two years, we have invested in increasing the number of our long-haul high-carrying capacity transport vehicles. We have also set up 18 branches across India from where we are providing long-haul pool transport movement service. We have even customised our vehicles to handle cargo of different shape, size and varieties.

TDB: Online retail space is growing at a frantic pace in India. What opportunities and challenges has it thrown up for the logistics sector?

VA: Our group company Blue Dart is a market leader in e-commerce delivery and we have some of the largest e-retail players as our clients. One of critical components of e-commerce success is e-fulfillment. E-fulfillment involves backend activities and includes places where products are stored and from where products are picked and shipped either by us or anyone else appointed by the e-commerce company. We are working with large players who are operating globally, and for them we have set up e-fulfillment centers in India. So, e-fulfillment centers are the next growth area and we are already helping e-commerce companies meet their delivery requirements.

TDB: How have the soaring real estate prices and complexities related to land acquisition in India affected your warehousing business?

VA: Almost 60% of India’s GDP comes from regions located in and around the vertices of the golden quadrilateral. So, with an eye on the post-GST scenario, we are focused on developing large warehouses in convenient locations in the four metros. In fact, a few more would be coming up in other bigger cities as well. These warehouses are owned and managed by DHL, but the land is acquired by our local partners, who are basically land developers. Land acquisition in India is a big challenge, given that land holdings are very small and a developer has to acquire several small pieces of land without clear titles before our warehouses are setup.

TDB: How much difference (in percentage terms) can world-class supply chain systems make to the competitiveness of Indian goods in international markets?

VA: Logistics costs, as a percentage of GDP, in developed economies is around 7%, whereas the same in India is about 13-14%. India is a large country and has complex terrain. Given such a scenario, if logistics costs can come down by 4-5%, the benefits for manufactures could be immense – about $100 billion, considering we are a $2 trillion economy.  Going forward, a game changer would be if more cargo, which are largely moved by road today, could be transported by rail.

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“Service tax is one of the biggest concerns of India’s logistics industry” - Harpreet Singh Malhotra, Chairman & MD, Tiger Logistics

 

A relatively young player in the Indian logistics space, Tiger Logistics can today count Hero MotoCorp, Bajaj Auto, Honda Cars, Piaggio and LG Electronics as its clients. In an exclusive interaction with The Dollar Business, its Chairman & Managing Director Harpreet Singh Malhotra discusses issues that the government should resolve to help the sector grow and prosper

Interview by Sisir Pradhan | The Dollar Business

TDB: What are the main problems encountered by India’s logistics sector?

Harpreet Singh Malhotra (HSM): The logistics business is high-cost, low-margin in nature. The problem of organised players is compounded by unfair competition with unorganised players, who can get away without paying taxes stipulated in the Motor Vehicles Act. Existence of the differential sales tax structure also bring-in diseconomies of scale. Although VAT is in existence since 2005, failure in implementation of a uniform VAT structure, across different states, has led to problems. Apart from the non-uniform tax structure, logistics players have to pay numerous other taxes, octroi and face multiple check posts and police harassment. High costs of operation and delays involved in compliance, with varying documentation requirements of different states, make the business unattractive.

TDB: How do you see the future of India’s logistics sector, particularly since the demand for multi-modal transport services is growing?

HSM: Despite problems, the Indian logistics industry is growing at 15-20% as compared to the world logistics industry growth of about 10%. Since the organised sector accounts for merely 1% of the market, there is immense potential for the growth of the sector. There are major opportunities due to increasing interest of entrepreneurs as logistics services can be provided without assets. Moreover, Indian shippers are gradually becoming more aware of the benefits of logistics outsourcing. They are now realising that customer service and delivery performance are as important as cost, to remain competitive in the global economy. It is also expected that infrastructure development will boost investments in the logistics sector. India, being looked as a manufacturing hub, will create more demand in the logistics sector.

TDB: Do you think GST will be a game changer for India’s logistics sector?

HSM: Service Tax is the biggest concern of the logistics industry. Currently, taxation guidelines revolve around definitions and modes, dissimilar abatement rates and the ultimate liability of tax payment, which makes things unclear for service providers. All these can be tackled through the introduction of GST to cut down overall costs, create a simple tax structure and make a single tax levied market by eliminating state specific tax barriers. GST will also encourage companies to set up their units in outward strategic locations that will help increase the product flow and distribution system. It will also ameliorate transit because of simplification at state border crossings.

TDB: Let’s talk about Tiger Logistics. What prompted you to enter the logistics business? And how did you win the confidence of India’s top automakers?

HSM: When we entered the business, logistics was an unorganised sector and there were not many organised players, which was a great opportunity to establish ourselves as an organised player. To win the confidence of companies like Honda, Yamaha, Suzuki etc., it was necessary to put ourselves in their shoes and understand their requirements. We initiated with small steps, but we did it with the faith to conquer their trust and deliver services as per their expectations.

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“Coastal shipping should be encouraged to decongest national highways” - Shashi Kiran Shetty, CMD, Allcargo Logistics Ltd.

The logistics sector is the driving force and a major facilitator which puts the country on the wheels to fast-paced economic growth. However, there are certain roadblocks hindering the progress of this sector in India. So, to have a clear perspective of the situation and to learn the real potential of the sector, The Dollar Business caught up with Shashi Kiran Shetty, CMD, Allcargo Logistics Limited

Interview by Sisir Pradhan | The Dollar Business

TDB: You primarily operate in the less-than-container load (LCL) category. Any specific reason? Do you plan to expand into other categories as well?

Shashi Kiran Shetty (SKS): When we entered the containerised cargo segment, we found there is a lot of demand for LCL containers. Hence, we focused on addressing the needs of this segment. There are many exporters who have half container load consignments and we help these customers to dispatch their goods at a quicker succession, primarily due to our expertise in LCL and FCL (full container load) segments. We consolidate consignments at a faster pace, hence the containers are shipped without much delay. A majority of our business is coming from our multi-modal approach and integrated business model. Due to these we are able to efficiently handle a variety of shipments ranging from containers to project cargo. Our international presence also helps us in delivering goods much quicker and in a cost-effective way.

TDB: What would you say are the main strengths of your company?

SKS: Our global expertise and network,, combined with our ability to understand customer’s logistics needs, is what makes us the leader across India. We have always focused on innovating our services, benchmarking our performance to global standards and surpassing our previous performances across our businesses. These values and the culture, to be the best in what we do, are the main reasons for Allcargo’s success.

TDB: The number of homegrown MNCs in India’s logistics sector is still negligible. Why hasn’t the sector taken off the way it should have?

SKS: With India’s increasing role as a global player in trade and commerce, more and more Indian companies are bound to emerge in the logistics space. The reasons why the number has remained small are multifold – for instance,  lack of government support and inadequate infrastructure. However, we are now seeing a positive trend with a more pro-economic, pro-efficient government at helm.

TDB: Despite private participation, major Indian ports (particularly JNPT, Chennai and Mumbai ports) are very congested. What needs to be done to clear the bottleneck?

SKS: Tariff fixation in major ports in the country is still governed by Tariff Authority for Major Ports (TAMP). Although TAMP regulated pricing helps control tariff of various ports, it ultimately hinders private investment. As a result the port infrastructure in the country hasn’t scaled up the way it should have. Due to this factor, port efficiency is affected and there is a delay in evacuation and movement of cargo in and out of ports. Because of this, not only are the exporters and importers losing money, but it also having an impact on the environment as waiting vehicles burn more fuel. Moreover, Indian ports need to be upgraded to international standard. For instance, drafts at various ports need to be increased to allow berthing of larger size vessels. This will ultimately reduce transportation cost of goods. Government should also encourage coastal shipping as it would ease load and congestion on national highways.