National conference on

Container Infrastructure in India 2012

Background Paper

February 2012
www.deloitte.com/in
Contents

Introduction 1

Policies & Trends in Containerization 5

Container Infrastructure Development at Ports 11

Container Movements in India, Way of Transportation & Challenges 14

Container Freight Stations & Inland Container Depot Infrastructure 20

Container Rail operations 29

Bibliography & References 34

Contact 35
Introduction

“Containerization is the use of containers to unitize cargo for transportation, supply and
storage”. Container logistics thus incorporates supply, transportation, packaging, storage, and
security together with visibility of container and its contents into a distribution system from
source to user.

Ports, railways, roads, warehouses, shipping & logistics companies, by virtue of being the
primary players dealing with containers are also the key contributors to the development of
container trade & infrastructure.

The advancement in overall trade and benefits due to adoption of containers for transport has
brought forward the term “Trading in the „Box‟”. Containerization thus, in trade terms, is the
driver of various players towards utilizing containers for transporting goods between various
places and by various modes of transport.

There are various container types catering to different needs:

 General purpose dry cargo containers for boxes, cartons, cases, sacks, bales, pallets,
drums in standard, high or half height

 High cube purpose container, which is a 40- foot container of 9' 6" height. It is
recommended for light voluminous cargoes which would otherwise not fit in a normal 8'
height container

 Refrigerated or reefer containers

 Open top containers for bulk minerals, heavy machinery

 Open side for loading oversize pallet

 Flush folding flat-rack containers for heavy and bulky semi-finished goods, out of gauge
cargo

 Platform or bolster for barrels and drums, crates, cable drums, out of gauge cargo,
machinery, and processed timber

 Insulated Containers for perishable goods (fruits, vegetables etc) which require protection
from temperature change without necessity of refrigeration.

 Ventilated containers for organic products requiring ventilation

 Tank containers for bulk liquids and dangerous goods

 Rolling floor for difficult to handle cargo

 Collapsible or folding flat rack containers

 Bulk containers for grain, fertilizers, chemicals etc in bulk. It is fitted with manholes to
facilitate bulk cargo through gravity.

 Garment containers are fitted with hangers to help loading a large number of garments in
hangers inside the container.

 Pen container for cattle or livestock. It has netted windows on the side or ends to facilitate
ventilation. On the lower part of the side walls it has cleaning and drainage outlets.

National conference on Container Infrastructure in India 2012 Background Paper 1

The advancement in overall trade and benefits due
to adoption of containers for transport has brought
forward the term “Trading in the „Box‟”.
Containerization thus, in trade terms, is the driver
of various players towards utilizing containers.

National conference on Container Infrastructure in India 2012 Background Paper 2

The advantages of containerization are well known throughout the industry. Few of them are:
 effective handling of cargo (specially liquid cargo),

 minimal or no damage to goods,

 optimum utilization of storage & warehousing capacity,

 technology adoption due to mechanized handling required for handling containers,

 skill development of workers for operating containers,

 reduction in transport time,

 door-to-door or end-to-end delivery of goods etc.

Additionally, containers enhance the effectiveness of overall supply chain mechanism in the
trade.

The abundant opportunities offered by containers lure various transport sector players to
promote the containerization drive. Government of India has taken several initiatives & brought
forth policies to increase the utilization of containers.

Containers & Ports

Ports are the primary influence to the containerization movement. The following chart provides
a glimpse of the container traffic handled at the major ports in the past .

Container Traffic at Major Ports (in MT)

120
100
80
60
40
20
0
2005- 2006- 2007- 2008- 2009- 2010-
06 07 08 09 10 11
Container Traffic (in MT) 61.98 74.44 92.27 93.14 101.24 114.05
Growth in Container
20.10% 23.95% 0.94% 8.70% 12.65%
Traffic (in %)

 The Container traffic at major ports has almost doubled in the past 5-6 years

 Container traffic at major ports shows growth at an average rate of 13.27%

per year

 Globally the container traffic has grown at around 10% in the past 20 years

 This showcases the consolidated position of Indian container industry vis-à-

vis the world

National conference on Container Infrastructure in India 2012 Background Paper 3

According to estimates, the world container throughput will reach 1 billion TEUs by 2020, which
is almost double of the current container traffic. The emerging Asian & African Countries are
expected to be the prime movers in achieving this growth. Most of the shipyards are filled with
orders for container ships of over 10,000 TEUs capacity. These container ships will form the
major part of the world maritime fleet in the coming years.

India is going to be the preferred destination for a global manufacturing hub. This fact presents
many opportunities for the ports to change their current operation style and be ready for the
foreseen surge in demand of handling and faster evacuation of containers. Many investments
have been proposed and steps have been taken by various port authorities for attracting the
container traffic.

Containerized Cargo Commodities

The major cargo commodities that get containerized are garments, electronic goods, agro
products, cotton yarn, machinery/parts, granite products, coir products, leather products and
jute products. Indian ports have also been seeing many hitherto break bulk cargoes like rice,
maize, glass, granite, garnet sand, sugar, soya, cement and flowers now moving in containers.

Some break-bulk cargo such as banana, cotton and green coffee beans have become
permanent container fixtures, while others such as pulp, lumber, cocoa and onions migrate
from container to ship holds and back to containers, according to the rise and fall of box rates.
Even iron ore has been successfully exported from Chennai in containers. All this points to a
steady move towards containerization for value added benefits. The main beneficiary would be
the container shipping industry and container terminals.

In addition, with regards to the cost economics, the handling cost is lower for containerized
cargo as opposed to break bulk leading to containerization of minerals exported. With 40 per
cent more imports than exports, incoming containers wait for repositioning to other locations.
Container lines, instead of spending on shipping out empties, offer good deals for shippers to
specific locations as a result of which soya, sugar, steel plates and agricultural products have
gone the container way.

National conference on Container Infrastructure in India 2012 Background Paper 4

Policies & Trends in
Containerization

The success of any sector or industry depends on both private players and the Government
Authorities. Accordingly, the success of the infrastructure sector or containerization as a sub-
set cannot be attributed to efforts of single side. Policies and regulations thus play an important
part for the development of container infrastructure. The following section provides an
assessment of the salient features of various policy & regulations affecting the development of
container infrastructure and in turn growth of container movement in India.

Policies affecting Containerization

Foreign Direct Investment

One of the parameters for judging the maturity of a country‟s trade & industry is development of
infrastructure. In emerging economies like India, the budgetary allocation for development of
infrastructure is structured phase-wise so as to develop the infrastructure as well as to do
justice to other sectors like education, health, food & nutrition, defence etc. In such cases the
investments by FIIs & lending from multilateral agencies form a major part of the sources of
finance for funding the long term and huge capital expenditure involved in the infrastructure
sector.

While relaxing the norms for foreign investments in India in 1992, Indian government also
considered the infrastructure requirements and thus opened the infrastructure sector for
investments.

Infrastructure development is of prime importance to the containerization drive. In the transport

infrastructure sector, there are no restrictions on investment. Following are the salient features
of FDI policy on transport infrastructure sector:

 100% FDI in maritime infrastructure like ports, terminals, jetties, harbors, merchant
shipbuilding

 100% FDI in support infrastructure like warehousing, roads, Inland Water Transport, other
logistics components

Draft Policy on Private Freight Terminals (PFT)

New PFT policy supersedes the Old PFT policy. The policy aims to stimulate development of
privately owned freight terminals on private land for dealing with break bulk goods, parcel traffic
and containers. Under this policy PFTs are envisaged to provide goods handling, warehousing
and other associated logistics services to rail users and facilitate expansion of third party
logistics sector. The following are some of the salient features of the PFT policy.

Salient Features Beneficiaries / Key stakeholders

 PFTs are envisaged to provide goods  Warehousing and distribution

handling, warehousing and other associated companies
logistics services to rail users and facilitate
 Subsidiaries and joint ventures of
expansion of third party logistics sector
private companies

National conference on Container Infrastructure in India 2012 Background Paper 5

 The revenue model involves fee sharing  Investors
between the Indian Railways and the private
 3 party logistic providers
operator after 5 years of commissioning the
terminal

 The private operator will be allowed a

wagon freight rebate of 12% rebate for a
period of 20 year extendable by another 10
years

 The terminal can be done on green field and

well as brownfield land

Benefits Challenges

 The freight operator can carry fertilizers,
cement, chemicals, edible oil and
petrochemicals excluding gas, auto fuel and
kerosene. Relevant to manufacturers of
FMCG goods for inbound and outbound
logistics or high volume goods
manufacturers
 Investors in this scheme will have direct rail
access to third party freight forwarding
cargo,
 If the investing company is a 3PL they can
provide value added services or assembly
at these locations and charge for the same,
 The contract is long term for a period of 20
years
 Underutilized/unutilized existing sidings get
opportunity for commercial utilization for
their facility
 Procurement of greenfield land is time
consuming and setting up terminal
could take more than 2 year. This
results into forfeiture of security deposit
 Commercial non-viability of project does
not make it an attractive proposition for
private siding owners
 The clause to change private siding into
a brownfield PFT and the minimum land
and line requirement to be called a PFT
cannot be necessarily followed at the
same time. Not all private siding owners
would have additional land in the
vicinity of the terminal to install a
structure
 Policy is still being amended and lack of
clarity makes it unattractive to investors

Cabotage Policy & Coastal shipping recommendations (from Draft new

policy)
The Cabotage Policy checks the coastal trade of a country. Few countries practice absolute
Cabotage law while others practice a tailored one. In India, the Cabotage Policy is not
absolute. It is regulated through provisions of Sec. 406 & 407 of the Merchant Shipping Act,
1958.

The Draft Coastal Shipping Policy submitted to Ministry of Shipping for approval recognizes
that due to lack of containerization & restrictions on feedering of the cargo under the current
Cabotage policy, a considerable part of Indian cargo for transshipment through containers gets
diverted to Colombo, Singapore & Jebel Ali Ports.

National conference on Container Infrastructure in India 2012 Background Paper 6

Key recommendations under the Coastal Shipping policy for container trade boost

 Opening up of foreign flag vessels will boost containerization and requisite infrastructure &
practices.

 To develop a Freight Exchange for India centric international container trade later
extendible to coastal operations. Doing this will lead to an e-market for supply of freight and
corresponding tonnages to cater to such trade. Shippers can access the database and
book cargo against the capacity. This facility is proposed to be also available for
containerized cargo originating from select CFS/ICDs.

Policy to Permit Various Operators to Move Container Trains on Indian

Railways
This policy was formulated to permit rail linking of Inland Container Depots (ICDs) by private
parties other than CONCOR and allowing them to move container trains on the same lines as
CONCOR for both international and domestic traffic. Following are the salient features of the
policy:

Sr. Policy Heads Features

1. Eligibility

1.1 General The scheme is open to all registered Indian

public/private sector companies/persons either
individually or in joint venture. It will include Indian
registered companies of foreign entities

1.2 EXIM Traffic The prospective operator should have a suitable

access to a rail linked ICD with adequate handling
capacity in the hinterland / inland location for handling
of container trains

OR

The operator should enter into an agreement with an

existing rail ICD operator/rail terminal operator for
using his facility for container train operations, within
six months of obtaining in principal approval from
MOR.

OR

The operator gives an undertaking that he will

develop his own ICD with rail facility within a period of
three years from the date of in principal approval to
operate container trains.

1.3 Domestic Traffic The prospective operator should have a suitable

access to two rail linked ICDs with adequate handling
capacity in two hinterland/inland locations for
handling of container trains

OR

The operator should enter into an agreement with an

existing rail ICD operator/rail terminal operator for
using his facility at two locations for container train
operations, within six months of obtaining in principal
approval from MOR

OR

National conference on Container Infrastructure in India 2012 Background Paper 7


1.4 Should be engaged in any of
the following services
2. Regulation of Rail
Container Operations
2.1 Category – I: JNP/Mumbai
Port - National Capital
Region Rail Corridor and
beyond
2.2 Category – II: Rail corridors
serving JNP/Mumbai Port
and its hinterland in other
than National Capital Region
and beyond
2.3 Category – III: Rail corridors
serving the ports of Pipavav,
Mundra, Chennai/Ennore,
Vizag and Kochi and their
Hinterland
2.4 Category – IV: Rail corridors
serving other ports like
Kandla, New Mangalore,
Tuticorin, Haldia/Kolkata,
Paradip and Mormugao and
their hinterland and all
domestic traffic routes
National conference on Container Infrastructure in India 2012 Background Paper
The operator gives an undertaking that he will his
own ICD with rail facility at two locations within a
period of three years from the date of in principal
approval to operate container trains
 Transport
 Trade and Commerce
 Infrastructure
 Handling of Goods / Cargo
 Port / Land Terminal operations
 Logistics
 Warehousing
 Manufacturing
 Leasing
In order to regulate the entry of new rail container
operators on lndian Railways (IR) network, various
routes have been grouped into four categories largely
based on the existing as well as anticipated traffic
volumes on different rail corridors serving gateway
ports. These categories are as follows:
This category includes all existing/future ICDs serving
JNP/Mumbai Port in National Capital Region like
Tughlakabad, Dadri, Gurgaon, etc. This will also
include all destinations reached via National Capital
Region like Dhandari Kalan, Moradabad etc. This
category will also include all domestic traffic
This category includes all existing/future, ICDs
serving JNP/Mumbai Port at locations other than
those covered in category I. This category will also
include all domestic traffic except on category I routes
This category includes all existing/future ICDs serving
these ports. This category will also include all
domestic traffic except on category I routes
This category includes all existing/future ICDs serving
these ports. This category will also include all
domestic traffic except on category I routes
8
3. Financial Capability

3.1 In case of an individual or a single company, either the turnover or the net worth
should be a minimum of Rs 100 crore

3.2 In case a number of companies form a consortium for the purpose of operating
container trains, each constituent member should have either annual turnover or net
worth of at least Rs 50 crore

3.3 Companies which have been declared sick under SICA Act will not be eligible to
participate in the proposed scheme either singly or in association with the other
companies for container train operation

4. Approval Process

4.1 If the proposed operator has to set up a new ICD then for rail linking an Inland
Container Depot (ICD) he must obtain the requisite permissions from the concerned
authorities of the Government of India for setting up and operating the ICD within six
months

4.2 The proposed operator should submit his request in, writing to MOR indicating therein
his legal identity, intended, scope of operations for the next five years atleast, proof of
complying with various eligibility criteria indicated in this' policy, and willingness to
abide by the terms and conditions laid down in the policy and as amended from time to
time

4.3 Based on the documents furnished and clarification, if any, Railways will give their „in
principle‟ approval. In case the prospective operator fails to indicate his readiness to
operate his container trains to Railway's satisfaction within 3 years of grant of „in
principle approval‟ it will be deemed to have lapsed unless prior extension is given by
railways at its sole discretion

4.4 Before actually commencing operations, the operator will enter into an agreement with
the Railways containing the detailed operating and accounting procedure: including
the ownership of the new lines/assets and other relevant details. The agreement will
have provision for suitable arbitration procedure for resolving any dispute.

4.5 The scheme will be open for one month every year.

5. Registration Fee At the time of submission of request to run container

trains every applicant would be required to deposit a
nonrefundable registration fee of Rs 50 crore for
applying for all categories of routes including category
I and Rs 10 crore for each individual category of
routes except category I. Applications only for
category I routes will not be accepted

The registration fee of applicants who are not found

eligible will be refunded without any interest

6. Modalities of Granting New In case the successful operator opts for category I, he
Licenses will get a flexible permission to run trains between
any pairs of points in the entire country. This will
include permission for all other categories also. In
case the operator applies for a particular category
(except category I), he will get permission to run
trains between any pairs, of points in that category

National conference on Container Infrastructure in India 2012 Background Paper 9

 only for EXIM traffic and in domestic traffic for all
routes, except those in category I.

There will be no limit on number of trains on any of

the routes.

7. Period of Validity of Permission for Operating Container Trains

7.1 The validity of permission will be for a period of 20 years from the date of operation of
container trains by the operator. The permission can be extended by 10 years to the
same party after expiry of the validity of permission subject to satisfactory performance
and on payment of the fee as applicable at that time, which will be decided by Railway
Board

An operator will be permitted to exit from the market or transfer the permission to
another operator for container train operational subject to the latter fulfilling the
selection criteria and subject to prior approval of the Ministry of Railways.

This permission will however, be granted only one year after rail borne container traffic
has commenced from his ICD

Impact of VAT
The phasing out of the Central Sales Tax (CST) and the introduction of Value Added Tax
(VAT) will tend to facilitate movement of goods by containers. CST compelled companies to
set up warehouses in the major states to avoid the tax implications. VAT would encourage the
manufacturers to realign their supply chain network by doing away with their many warehouses
across the country and concentrating on fewer & bigger regional warehouses. Manufacturers
would also be improving their hub and spoke distribution system, which would entail efficient
and safe transfer of goods from point to point. It can easily be achieved by containerization
movement. Hence a steady increase in the containerization of cargo even for domestic
movement is expected.

Implementation of VAT is expected to bring in uniformity not only in tax rates, but also
procedures. VAT would also remove the tax-based advantage, which some locations had in
terms of setting up a manufacturing unit or a warehouse, while IT Enabling of documentation
would lead to less flow of physical documents and workload. With the introduction of VAT, the
business community thus has an opportunity to work in close association with their logistics
service providers and put in place a lean supply chain network and improve their supply chain
efficiency.

National conference on Container Infrastructure in India 2012 Background Paper 10

Container Infrastructure
Development at Ports

Ports provide an interface between the ocean transport and land-based transport. India‟s port
infrastructure constitutes of 13 major ports and 187 non-major ports. Of the non-major ports,
only about 48 are operational; while the rest are only fishing harbors.

While the non-major ports contribute significantly to the overall traffic, the containerization
traffic mostly belongs to the major ports. Only select non-major / intermediate ports like
Pipavav Port, Mundra Port etc. cater to the containerized traffic. In other words the container
infrastructure and trade is untapped by the non-major ports. The reason for it may be the drafts
required for the large container ships or due to the major investments required to be done in
the containerization process.

Dedicated container terminals have been constructed across almost all the major ports to cater
to the demand of container traffic. Private players have set up the CFSs/ICDs in proximity of
the major ports.

The growth of container traffic is primarily dependent on items like capital & engineering
goods, textiles and food items which are transported in containers. The various major ports
have proposed to invest in infrastructure for development of containerized traffic. The following
table gives the details of some of the major container related investments proposed by Major
Ports:

Port Project Cost

Sr. Project Name Capacity Status
Name (in Mn)

1 Construction of two New Mumbai 0.80 14610 Anticipated date of

Off-shore Container Port MTEUs completion is
berths & Development September, 2012.
of Container Terminal
berth on BOT basis in
Mumbai Harbour.

2 Development of Berth Mormu- 4.61 4060 The date of award of

No. 7 as second coal gao concession was
MTPA
handling terminal on fixed on 15.5.2010.
DBFOT basis. Physical progress of
the overall project in
terms of percentage
is 13.75%. Financial
progress of the
overall project in
terms of percentage
is 19.62% (Rs. 79.65
cr.).

3 Development & Cochin Capacity 21180 Phase I of the ICTT

Operation of Project with an
addition
International Container investment of Rs.
Transshipment Terminal 1262 commissioned

National conference on Container Infrastructure in India 2012 Background Paper 11

 Port Project Cost
Sr. Project Name Capacity Status
Name (in Mn)

(ICTT) at Vallarpadam of 12.5 to on 11th February,

(BOT basis by M/s India 2011.
40 MMT
Gateway Terminal Pvt.
Ltd. a subsidiary of M/s. In phases
Dubai Ports
International)

4 Development of Second Chennai - 4920 Project facilities and

Container Terminal services were
(CITPL) on BOT basis. completed &
commercial
operation has
already been
commenced on
22.9.09.

5 Construction of Ennore 18.0 14070 Preliminary works

Container Terminal on are going on and
MTPA
BOT basis expected to be
completed in 2013-
14

6 Development of Multi- Paradip 5.0 3873 Letter of Award has

Purpose berths to been issued to the
MTPA
handle clean cargo H1 bidder i.e.
including container on Consortium of
BOT basis Sterlite – Leighton
@ 23.4% revenue
share to the port. In
the meantime,
Sterlite – Leighton
has sought time till
30th June, 2011 to
complete all
formalities on the
SPV and have
requested Port for
expediting
Environmental &
Forest clearance

7 Fourth Container JNPT 6.8 41000 Likely commission

Terminal (DBFOT period of Phase – I,
MTEUs Phase -1
Basis). is May, 2014. In
27000 respect of Phase-II
the development will
Phase – II
be taken up after
completion of
Phase-I.

8 Development of JNPT 10.0 6000 Out of seven

standalone Container shortlisted
MTPA
handling facility with a applicants five have
quay length of 330 m. to collected RFP. The
the north of JNPT. project is currently
under biding

National conference on Container Infrastructure in India 2012 Background Paper 12

 Port Project Cost
Sr. Project Name Capacity Status
Name (in Mn)

9 Development of New NA 2697 No bids have been

Container Terminal at Mangalor received on the due
NMP on BOT basis. e date. The project is
under review.

10 Development of Mega Chennai 4.0 36860 Invitation of RFQ

Container Terminal on process completed.
MTEUs
BOT basis. Ministry‟s approval
awaited for issue of
Bids to the
prequalified RFQ
applicants.

11 Conversion of berth No. Tuticorin 7.2 3122 Awaiting Ministry‟s

8 as container terminal approval on
MTPA
on BOT basis. restriction of
Monopoly policy
decision. Likely
commission period
is December 2011

12 Development of all Maharas 44.7 43000 Share holding

weather and Multi user htra pattern approved.
MTPA
Port on BOOST basis Environmental
(1.7
by M/s. Amma Lines Ltd clearance awaited.
(To become hub port in MTEUs) Anticipated date of
South Asia with draft 20 completion is 2010
Container
Mtrs.)

13 Development of Mundra Mundra 125 12000 Capital dredging in

port ( South port and progress for south
(Gujarat)
North port ) for port.
containers, LNG, Liquid
Bulk, Car Terminal &
General cargo. By
Mundra port SEZ Ltd.

14 Mechnization of Okhla Okha 9.28 790 Pre-feasibility study

port by GVK power and MMTPA has been completed.
(Gujarat)
Infrastructure Ltd. Detailed studies are
+
underway
0625M
TEU

From the table above we can see that the major ports in India have already endeavored to
adopt containerization and reap its benefits. The ports in India have taken steps to ensure that
we just not do the bare minimum but go ahead by leaps and bounds.

National conference on Container Infrastructure in India 2012 Background Paper 13

National conference on Container Infrastructure in India 2012 Background Paper 14
Container Movements in
India, Way of Transportation
& Challenges

Transportation infrastructure works as a catalyst for the economic betterment of any country.
Better transportation network in a country leads to faster movement of goods and services,
resulting into higher turnover of goods and increase in GDP.

Connectivity to the hinterland is of prime importance to boost the container trade. Adequately
planned schedules, well synchronized intermodal network and availability of end-to-end
connectivity to the prime destinations or consumption centers improve the distribution network
and reduce the transit times.

Roads and railways form an invaluable part of the connectivity network of the Indian Transport
System. IWT in India is not well developed and is also not available for the last mile
connectivity. Thus Indian goods transport has to rely a lot on the roads and railways for the
end-to-end delivery of goods.

Government of India has taken up the challenge to form a dedicated network of highways and
railway lines through various schemes and plans. The Expressway and the Golden
Quadrilateral are some of the examples of the highways network development initiatives while
the Dedicated Freight Corridor is representative of the efforts by the Ministry of Railways.
Additionally, Indian Railways and the Railway Ministry have set out quite a few policies like
Private Freight Terminals policy etc. for enabling the container infrastructure setup.

The Great Indian Roads:

India is a country having one of the largest road network of approximately 42.36 lakh kms.
However the quality of the road infrastructure is inferior as compared to other countries.
Analysis of the transport budgets of some states shows that the amount of money allocated to
the sustenance of the existing road network far surpasses the allocation to the new road
development. In some regions, it is almost double the budget for new works. Despite this, the
quality of the roads and their actual life expectancy is far less than expected..

As per the Road Transport & Highways Department around 60% of the total freight and around
87% of passenger traffic is carried by Indian roads. The traffic forecasts show that the road
traffic is expected to grow at a rate of around 8-10%.

National conference on Container Infrastructure in India 2012 Background Paper 15

The Indian Roads Network is divided into the following major heads:

Indian Roads

Expressways National State Highways District Roads Rural Roads

Highways
• 6-lane highway. • They connect • Connect with • Connects the • These roads
• A shoulder-type state capitals the state towns & form around
extra lane is with national capitals, production 35% of the
given on both capital & major National centers with total length
sides ports Highways, state highways of the roads
• Carry around District & villages to in India
• Currently headquarters, the towns &
connects to 40% of total • Total length
road traffic major cities cities of rural roads
major cities. and non-major
• NHAI is the • Total length = is 14,33,577
• Total length of ports
responsible 25,77,396 kms
an Expressway • These are
is around 200 authority for
their funded through
km the state
development &
• Design Speed is sustenance budget
around 120 kms allocations
per hour • NHDP
programme by • Total length of
• Plans for direct / Central Govt. state highways
indirect proposes 4 is 1,54,522
connectivity to phased
Expressways development of
from various the overall road
Port are on- infrastructure.
going
• Total length of
Expressways +
National
Highways =
70934 kms

As indicated, NHDPis a single multi-crore project with several phases. The completion of these
phases will be a landmark achievement in the road transport network.

The following table shows the current status of the NHDP projects started by NHAI & GOI:

Overall Status, Length Completed As On 31.12.2010 Of Different Phases Of NHDP

Phases Total Length Length Completed Likely date of

(in km) (in Km) Completion

I - GQ,EW-NS corridors, 7,498 7384 -

Port connectivity & others

II - 4/6-laning North 6,647 4934 Dec -2010

South- East West
Corridor, Others

III - Upgradation, 4/6- 12,109 1968 Dec-2013

laning

IV- 2- laning with paved 20,000 - Dec- 2015 (as per

Shoulders financing plan)

National conference on Container Infrastructure in India 2012 Background Paper 16

V - 6-laning of GQ and 6,500 443 Dec-2012
High density corridor

VI - Expressways 1000 NIL Dec-2015

VII - Ring Roads, 700 km of ring NIL Dec-2014

Bypasses and flyovers roads/ bypass+
and other structures flyovers etc.

Source: Annual Report of MORTH, 2010-11

The following table represents the allocation from the Central Road Fund under various heads
for the year 2010-11. We can clearly see that the National Highways (including Expressways)
allocation clearly outclasses the other allocations.

Sr. Allocation Head Amount (In Cr.)

1 Grant to State Governments and UTs for State Roads 1893.75

2 Grant to States & UTs for Roads of Inter-state Connectivity & 210.42
Economic Importance

3 National Highways 7848.98

4 Rural Roads 4434.12

5 Railways 876.73

Total 15264.00

Allocation from CRF Grant to State

Railways Governments
6% and UTs for
State Roads
12%

Rural Roads Grant to States

29% & UTs for
Roads of ICEI
1%

National
Highways
52%

It is noteworthy that most of the projects under NHDP are proposed to being developed in
association with private players / developers on PPP basis. While developing such an
extensive network of highways across India, many restraints and challenges are faced by both,
the government as well as the private players. The common yet key challenges raising their
hood against the advancement of the road network have been summarized below:

National conference on Container Infrastructure in India 2012 Background Paper 17

Sr. Challenges Details

1 Land acquisition: There has been inordinate delay in acquisition of land in some
States mainly due to procedural formalities, court cases and
lack of full co-operation from the State Governments
concerned

2 Environment and There have been considerable delays in getting the forest
Forest Clearances clearance both at the Central and State level

3 Clearances of Rail Over Bridges (ROBs) and Rail under Bridges (RUBs) had
Railways for ROB to be constructed to make the NHDP free from level crossing
designs on Railways. Obtaining the clearances/approval from the
Railways involves co-ordination with several Departments
within Railways and it takes a long time to get the necessary
approvals

4 Shifting of Utilities Shifting of utilities of different types e.g. electric lines, water
pipelines, sewer lines, telecommunication lines which were to
be completed with the assistance of the concerned utility
owning agencies took a considerable time

5 Law and order In many States, works have been affected because of adverse
problems law and order conditions and activities of anti-social groups. In
addition, the stoppage of works by the local population
demanding additional underpasses / bypasses, flyovers, etc.
was also frequent.

6 Poor performance by Performance of some of the contractors has been very poor.
some contractors Cash flow problem has been one of the major reasons for poor
performance. The termination of such contracts often results in
long-drawn litigation and further delays in completion of works

Source: Annual Report of MORTH, 2010-11

Addressing the above bottlenecks will expedite the development of the road network & other
untouched areas of technological innovations for road safety and sustainable transport.

The Indian Railways:

Indian Railways is the 5th largest network in the world. The only nations ahead of India in
terms of the Railway infrastructure are the United States, Russia, Canada and China. The total
length of Indian Railway is around 63,327 kms out of which 41% is electrified.

There are a total of 17 zones divided in accordance with various administration jurisdictions.
Each of these zones is responsible for the operations, management & sustenance of the
subdivisions and the railway tracks coming under its jurisdiction.

Almost 72.5% of total railways length is single line and is utilized by passenger as well as
freight trains. The sharing of railway sidings amongst the passenger and freight trains causes
disruption in the smooth functioning of the trains. Long waiting time and uncertainty of arrival
are the two primary reasons for the delay in time of freight goods.

For augmenting the rail transport capacity and to meet the growing demand of the freight
traffic, the Indian Railways planned the Dedicated Freight Corridors which will cater to only the
freight traffic.

National conference on Container Infrastructure in India 2012 Background Paper 18

Dedicated Freight Corridors were proposed to be developed on the Eastern (Ludhiana in
Punjab to Dankuni near Kolkata – 1839 kms) and Western (from JNPT to Tughlakhbad and
Dadri in Delhi – 1534 kms) Corridors.

Of the two, the Western Corridor is specifically dedicated to the container traffic requirements
for the existing as well as emerging ports of Gujarat, Maharashtra and northern hinterland. The
Western corridor route comprises of following main destinations: JNPT-Surat-Vadodara-
Ahmedabad-Palanpur-Ajmer-Rewari. It is proposed to be an electrified automatic double line
corridor except for a patch of 32kms from main corridor to Tughlakabad where it will be a single
line link.

DFCCIL a SPV, is specifically created for implementation of these project.

The salient features of these two corridors can be given as:

Features Western Corridor Eastern Corridor

Route Description JNPT-Ahmedabad- Dankuni-Gomoh-

Palanpur-Rewari- Sonnagar- Mughalsarai-
Tughlakabad / Dadri Kanpur- Khurja-Ludhiana

Route Kilometre 1534 1839

No. of lines Double (Single- Double (Single – Khurja-

Tughlakabad-Pirthala) Ludhiana)

Signaling Automatic signaling with 2 Automatic signaling with 2

kms spacing on double kms. Spacing on double
line. Absolute block line. Absolute block system
system on single line on single line

Traction Electrified (2x25 KV AC) Electrified (2x25 KV AC)

Axle loads 25 Tonne (sub-structure of 25 Tonne (substructure of

bridges fit for 32.5 tons bridges fit for 32.5 tonne
axle load) axle load)
Speeds 100 kmph 100 kmph
Traffic projections (2021-22) 128 million tonnes (6 144 million tons (160 trains)
million TEUs), (264 trains)
Feeder Routes 1516 Km 3071 Km
Total Cost [Current excluding cost Rs. 22,956 crore Rs. 23,605 crore
escalation, Taxes, Insurance,
IDC, Private Investment and Cost
of Land (Rs.4200 Cr.)]

Source: DFCCIL

The Western Corridor has been divided into two phases. Phase 1 consists of section from
Rewari to Varodara (approx. 950 kms) and the Phase 2 consists of section from JNPT to
Vadodara and Rewari to Dadri (approx. 584 kms). JICA will be funding the development of
both sections to the extent of 80%. Its investment in Phase 1 is INR 21,000 crore and in Phase
2 is 11,500 crore. So far the civil contract for the two packages has been initiated in March
2011. The main loan agreement for Phase 2 is aimed to be signed by March 2012. Inspection
and visits from the JICA Contact Mission is on-going.

Additional 54 major and important bridges are planned to be developed on the Western
Corridor between Vaitarana-Bharuch sections. This will be funded by the Indian Railways.
Overall these projects are proposed to be completed by 2016-17.

National conference on Container Infrastructure in India 2012 Background Paper 19

National conference on Container Infrastructure in India 2012 Background Paper 20
Container Freight Stations &
Inland Container Depot
Infrastructure

CFS and ICDs form a key part of the logistics industry infrastructure. CFSs are also termed as
Dry Ports in Western Countries.

A CFS/ICD/Dry Port can be defined as “Common user facility with public authority status
equipped with fixed installations and offering services for handling and temporary storage of
import/export laden and empty containers carried under customs control. Transshipment of
cargo can also take place from such stations.”

Distinction between CFS & ICDs

 In terms of functions there is no particular distinction between a CFS and an ICD. Both
cater to the transit facilities offering containerization of break bulk cargo and vice-versa.
These are served by rail and road transport.

 ICDs are generally located in the interiors or outside the port towns of country, distant from
the ports. CFS on the other hand are off-dock facility located near the port area. CFS are
largely expected to deal with break bulk cargo originating / terminating in the immediate
hinterland of port. They also deal with rail borne traffic to and from inland locations

 Considering the requirements of the Customs Act, and need to introduce clarity in
nomenclature, all containers terminal facilities in the hinterland are designated as "ICDs".

Functions & benefits of CFSs/ICDs:

Functions:
The primary functions of ICD/CFS may be summed up as under:

a. Receipt and dispatch/delivery of cargo.

b. Stuffing and stripping of containers.

c. Transit operations by rail/road to and from serving ports.

d. Customs clearance.

e. Consolidation and desegregation of LCL cargo.

f. Temporary storage of cargo and containers.

g. Reworking of containers.

h. Maintenance and repair of container units.

Benefits:
The benefits as envisaged from an ICD/CFS are:

 Concentration points for long distance cargoes and its unitisation.

 Service as a transit facility.

National conference on Container Infrastructure in India 2012 Background Paper 21

 Customs clearance facility available near the centres of production and consumption

 Reduced level of demurrage and pilferage.

 No Customs required at gateway ports.

 Issuance of through bill of lading by shipping lines, hereby resuming full liability of
shipments.

 Reduced overall level of empty container movement.

 Competitive transport cost.

 Reduced inventory cost.

 Increased trade flows.

Drivers & Challenges for the development of CFS / ICDs

The CFS/ICDs investments are lucrative investment avenues as they provide, high margins in
comparison with other logistics activities while the entry barriers and overall development
scope far more exceeds the other logistics services lines of business. The following table
analyzes the above discussed point.

Road Express Coast-o- Container CFS / ICD MTO

Freight coast Haulage

Scenario Mature Growth Growth Growth Capital Growth Mature

Intensive

Entry Barrier Low High High High Medium Low

Growth 5-10% 20-22% 15% 20% 35% 10-15%

EBIDTA 3-5% 8-10% 25% 30% 40% 4-6%

margins

The operations of the ICDs/CFSs revolve around the following centers of activity:

1. Rail siding (in case of a rail based terminal): The containers are loaded on and
unloaded from rail wagons at the siding through overhead cranes and / or other lifting
equipments.

2. Container Yard: Container yard occupies the largest area in the ICD.CFS. It is stacking
area were the export containers are aggregated prior to dispatch to port, import containers

National conference on Container Infrastructure in India 2012 Background Paper 22

 are stored till Customs clearance and where empties await onward movement. Likewise,
some stacking areas are earmarked for keeping special containers such as refrigerated,
hazardous, overweight/over-length, etc.

3. Warehouse: A covered space/shed where export cargo is received and import cargo
stored/delivered; containers are stuffed/stripped or reworked; LCL exports are
consolidated and import LCLs are unpacked; and cargo is physically examined by
Customs. Export and import consignments are generally handled either at separate areas
in a warehouse or in different nominated warehouses/sheds.

4. Gate Complex: The gate complex regulates the entry and exit of road vehicles carrying
cargo and containers through the terminal. It is place where documentation, security and
container inspection procedures are undertaken

Steps for setting up of a CFS / ICD:

The Ministry of Commerce, Government of India has issued guidelines for the setting up of the
CFSs/ICDs in India. These guidelines are summarized in the coming sections.

Steps / Phases Particulars / details

1 Feasibility Study  A feasibility study must precede the setting up of all

ICDs/CFSs and copy of the report should invariably
accompany the application for setting up such a facility.

 Data for carrying out analysis could be from secondary

sources and field observations, structured over time and
space.

 Prior discussions must be held with exporters, shipping

lines, freight forwarders, port authorities, concerned
Commissioners of Customs/Excise etc., and their point of
view fully reflected in the report

2 Analysis of traffic flows The analysis of traffic flows between centres of production &
ports shall be analysed with reference to the following:

 Commodities
 Directional-split (Imports/Exports)
 Proportions of less-than-container load (LCL) & full-
container-load (FCL)
 Forecast of future growth.
 Modes of transport available.
 Possible reduction in tonne per kilometre or
 Box per kilometre costs

3 Assessment of economic
viability
The facility should be a viable unit for various stakeholders like
the railways, transport operators, seaports, shipping lines,
freight forwarders etc. the guidelines stipulate certain minimum
amount of traffic (measured in TEUs) for the facilities to be set
up. The following are the suggested indicative norms which
form a part of criteria for the approval of CFSs/ICDs of at any
location across India:

 For ICD – 6,000 TEUs per year (Two way)

 For CFS – 1,000 TEUs per year (Two way)

4 Land Requirements The minimum area requirement for a CFS is 1 hectare and for
ICD 4 Hectares. There is however, a clause, which allows the

National conference on Container Infrastructure in India 2012 Background Paper 23

 CFSs/ICDs to be setup on a smaller than recommended area
considering the technological upgradation and other features
which could justify the demands

5 Design & Layouts CFS/ICDs are primarily designed for the reduction of
congestion at ports and other facilities of transport and
therefore must be designed in such a way which optimizes the
usage of the facility, reduces the congestion at ports and
minimizes the transaction time for transport of cargoes etc.

 The design & layout should be well equipped with

mechanical & electrical facilities, preferably of international
standards.
 The design must support the smooth flow of containers,
cargo & vehicles
 The design should be prepared taking into consideration
the estimated first 10 years volume and type of facilities
the exporters require
 The broad design should encompass features like rail
siding, container yard, gate house, security features like
boundary wall, fencing, pavements, office building and
public amenities
 The perimeter fencing and lighting must meet the
standards required by Custom Authorities
 The administration building should be focal point of the
production & production & processing of all documentation
relating to handling of cargo & containers and its size shall
be determined by needs of occupants
 Sanitation and food service facilities should also be
accounted for.
 Good communication systems with EDI connectivity is also
essential

The following infrastructure should however be available at

CFS/ICDs:

 Provision of standard pavement for heavy duty equipment

for use in the operational and stacking area of the terminal.
In cases where only chassis operation is to be performed,
the pavement standard could be limited to that of a
highway.
 Office building for ICD, Customs office and a separate
block for user agencies equipped with basic facilities.
 Warehousing facility, separately for exports and imports
and long term storage of bonded cargo.
 Gate Complex with separate entry and exit.
 Adequate parking space for vehicles awaiting entry to the
terminal.
 Boundary wall according to standards specified by
Customs.
 Internal roads for service and circulating areas.
 Electronic weighbridge.
 Computerized processing of documents with capability of
being linked to EDI.

6 Equipments  The ICD/CFS would select most modern handling

equipment for loading, unloading of containers from rail
flats, chassis, their stacking, movement, cargo handling,

National conference on Container Infrastructure in India 2012 Background Paper 24

 stuffing/de-stuffing, etc.

 Following minimum equipment should be made available

at ICDs/CFSs (Reach stacker may not be mandatory):

 Dedicated equipment such as lift truck (front end loader,

side loader or reach-stacker), straddle carrier, rail mounted
yard gantry crane, rubber tyred yard gantry crane, etc. of
reputed make and in good working condition (not more
than 5 to 8 years old) and equipped with a telescopic
spreader for handling the 20 ft and 40 ft boxes. The
equipment must have a minimum residual life of 8 years
duly certified by the manufacturer or a recognized
inspection agency. An additional unit of equipment should
be provided when the throughput exceeds 8000 TEUs per
annum or its multiples for lift truck based operations.

 Terminals resorting to purely chassis-based operations do

not require dedicated box handling equipment. However,
chassis-based operations should be restricted to CFSs
proposed to be set up near ports.

 Small capacity (2 to 5 tonnes) forklifts must be provided for

cargo handling operations in all terminals.

 The main function of an ICD/CFS being receipt, despatch

and clearance of containerised cargo, the need for an up-
to-date inventory control and tracking system to locate
containers / cargo is paramount.

 Each functional unit of the facility (e.g. siding, container

yard gate, stuffing/destuffing area, etc.) should have up-to-
date and where possible on-line, real time information
about all the containers, etc., to meet the requirements of
customers, administration, railways etc.

 As far as possible, these operations shall be through

electronic mode

7 Tariff  Tariff structure and costing is supposed to be worked out

along with the feasibility study and information should be
provided with the application

Source: Ministry of Commerce Website

National conference on Container Infrastructure in India 2012 Background Paper 25

Procedure for setting up of CFS/ICDs & implementation

1. Proposals for setting up ICD/CFS will be considered and cleared, on merits, by an

Inter-Ministerial Committee for ICDs/CFSs, which consists of officials of the
Ministries of Commerce, Finance (Department of Revenue), Railways and Shipping.
Views of the State Governments as necessary would be obtained

2. Application 10 copies in enclosed form should be submitted to the Infrastructure

Division in the Ministry of Commerce, Udyog Bhavan, New Delhi. Application must
be accompanied by 10 copies of feasibility reports mentioned in the guidelines

3. The applicant should also send a separate copy of the application to the
jurisdictional Commissioner of Customs. The Commissioner of Customs will send
his comments to the Ministry of Commerce and the Central Board of Excise &
Customs (CBEC) within 30 days. In case, the project is planned in a port town, a
copy of the proposal should also be sent to the concerned Port Authority who
would furnish their comments within 30 days to the Ministry of Surface Transport
and the Ministry of Commerce

4. The applicants are also requested to familiarize with the statutory Custom
requirements in relation to Bonding, Transit Bond, Security Insurance and other
necessary procedural requirements and cost recovery charges payable before filing
the application

5. On receipt of the proposal, the Ministry of Commerce would take action to obtain
the comments from the jurisdictional Commissioner of Customs and other
concerned agencies within 30 days. Wherever necessary, a copy of the proposal
should also be sent to Zonal Railway Manager, under intimation to the Ministry of
Railways One copy of the proposal would also be made available to the IMC
Members for advance action. The decision of the IMC would be taken within six
weeks of the receipt of the proposal under normal circumstances

6. On acceptance of a proposal, a Letter of Intent will be issued to the applicant, which

will enable it to initiate steps to create infrastructure

7. The applicant would be required to set up the infrastructure within one year from
the date of approval. The Ministry of Commerce may grant an extension of six
months keeping in view the justification given by the party. Thereafter, a report
would be submitted to IMC to consider extension for a further (final) period of six
months. The IMC may consider extension or may submitted to IMC to withdraw the
approval granted

8. The applicant, after receipt of approval, shall send quarterly progress report to
Ministry of Commerce. Three formats (given as annexure I to III) for sending the
quarterly/ annual report shall have to be submitted to Department of Commerce
through electronic mode as well as through hard copy

9. After the applicant has put up the required infrastructure, met the security
standards of the jurisdictional Commissioner of Customs and provided a bond
backed by bank guarantee to the Customs, final clearance and Customs notification
will be issued

10. The approval will be subject to cancellation in the event of any abuse or violation of
the conditions of approval

11. The working of the ICD/CFS will be open to review by the Inter Ministerial
Committee

Source: Ministry of Commerce Website

National conference on Container Infrastructure in India 2012 Background Paper 26

The CFS & ICDs are amongst the most rapidly growing segments of logistics industry in India.
The increasing container traffic at ports needs the support infrastructure which can
accommodate the traffic volumes of the containers. CFS & ICDs provide a safe investment
segment with lot of returns. CFS / ICDs being the supporting infrastructure for the port
development and port traffic fall under the direct trade segment of the ports. Thereby this is
also a lucrative sector for investing the reserve funds / acquiring stake in the development of
support infrastructure by ports.

Container Terminal projects like Vallarpadam ICTT, Ennore Contaner Terminal and Chennai
Mega container Terminal offer huge untapped opportunities to logistics players. These
container terminals are proposed to add a capacity of around 9 milling TEUs by 2020 and thus
boost the demand for CFS/ICDs in the adjacent areas to the ports.

According to a study the 3 million TEU capacity of Vallarpadam is supposed to create demand
for above 20 CFSs in the region. JN Port is currently the highest container traffic port and the
growth of container is still expected to grow at exhoribant rates. In addition, Kandla port and
Chennai Port also handle sizeable volume of containers. Mundra port (APSEZ) witnessed the
handling of above 1 milllon TEUs last year (2010-11), which has surpassed again this year.

The following table gives the list of ICDs/CFSs approved by the IMC which are under
implementation or functioning. In total there are around 247 CFS/ICDs in India and by far the
Tamil Nadu (60 in No.) ranks first according to number, followed by Maharashtra (48 in No.)
and Gujarat (33 in No.).

States wise number of registered CFSs/ICDs

Andhra Pradesh 13
Bihar 1
Chandigarh 1
Chhattisgarh 1
Goa 1
Gujarat 33
Haryana 9
Himachal Pradesh 1
Jharkhand 1
J&K 2
Karnataka 8
Kerala 11
Maharashtra 48
Madhya Pradesh 7
Orissa 2
Pondichery 2
Punjab 7
Rajasthan 10
Tamil Nadu 60
Uttar Pradesh 18
West Bengal 11
Total 247

Source: Ministry of Commerce, GOI website.

Complex procedures and systematic flow of goods needs to be planned out for the smooth
functioning of the CFS. The flow of goods is also affected by the type of weather, type of cargo,
frequency of the flow of goods, container handling facilities, time required for stuffing &
destuffing of containers etc. In the Indian scenario this complexity goes up higher than normal
and is the main cause of delays in delivery of goods. The ports as well as CFSs operators have

National conference on Container Infrastructure in India 2012 Background Paper 27

came to a conclusion that IT inclusion and IT communications technology & infrastructure can
enable them to effectively utilize their current capacities.

For any business to be successful, it must generate revenues and profit for the investors /
stakeholders. In CFS business, there are various segments which are the key revenue
generating centers. Following is a brief on few important revenue generating facilities / services
offered by CFSs.

Centers Status / remarks

Warehousing  Bonded Warehouses are typically used by the Custom Handling Agents
& shipping companies

 This segment, though important does not comprise a lucrative growth

sector within the CFS functions

Handling  It is dependent on the volumes of containers handled in a CFS

 It is usually outsourced to other specialized firms providing equipment,

facilities and skilled manpower for the same

 The more efficient the handling of the containers, lesser the dwell time
and more is the volume. This increases the revenue generation of the
CFSs. Companies with efficient container handling systems and
suitable technologies can work wonders

Rent  CFS charge rent for the ground on which containers are kept. Usually
the rent is based on incremental basis. It is minimum for first few days,
and increases thereafter as the number of storage days increases. This
increase in rent varies from time to time and from cargo to cargo.

 Though the ground rents are an important source of revenue for the
CFSs, they are primarily kept as a negative covenant. As the rent
increases, the profitability of the owner of cargo decreases due to which
the owners prefer to evacuate the containers as soon as possible.

 The rent is directly associated with the number of containers and as the
container turnover increases, so does the overall rent receipts.

Maintenance &  The rise of container traffic is also determined by the type of services
Repair offered for the cleaning, maintenance and repair of the containers.

 This is a relatively unchartered area as there are quite a few players

specifically providing these services for the containers.

National conference on Container Infrastructure in India 2012 Background Paper 28

Container Rail operations

It has been reiterated for quite some time that better connectivity of the hinterland and the ports
is the key to achieving the set ambitious growth targets for the development of the ports and
related infrastructure and thereby achieve the desired economic development.

Various ways and means have been adapted for achieving these goals. Development of
supporting infrastructure like CFS/ICDs, warehouses, mechanization of the ports, smooth data
flow system and containerization initiatives are quite a few of them.

The CFSs/ICDs function as dry ports or substitute arm which act in the capacity of the ports to
reduce the congestion at the seaports. Connectivity of railways is one of the key to success of
the containerization movement.

Indian Government, realizing the business potential for the container rail operations and its
strategic importance to the Indian companies, invited the players to take a stake in the
container rail operations. Privatization of container rail operation enticed 16 players. According
to the Indian Railways, private players would serve to:

 Increase Indian Railways‟ market share of container traffic

 Provide incremental capacity to cater to the exponentially growing containerized traffic in

India

 Ensure speedy clearance of export/ import of containerized traffic

 Substantially increase containerized domestic traffic on Indian Railways

 Improve quality of service to customers

These players offered integrated value added logistics solutions with last mile connectivity to
ports with a possible modal shift from road to railways. Most private players expect a return of
above 15% for investing in a business line so as to justify the investment decisions and cater to
their financing plans. Utilization and efficiency along with lower turnaround time are extremely
critical to generate returns of higher required returns.

Indian Railway has set up categories and recommended fees structure for these privatized
railway operators according to their areas of operations and needs. Indian Railways has given
licenses to private players, which allows them to offer container train movement by rail. The
private players can either take an all India license for Rs 50 crores or a route-specific license
for Rs 10 crores.

The following Table gives the areas of operation and registration fee for each category as was
announced in the final policy:

Category Areas of Operations Registration

Fee (Rs. In
Crores)

I  JNP/Mumbai Port - National Capital Region rail corridor 50

and beyond.

 This category will also include all domestic traffic

National conference on Container Infrastructure in India 2012 Background Paper 29

II  Rail corridors serving JNP/Mumbai Port and its hinterland 10
in other than National Capital Region and beyond.

 This category will also include all domestic traffic except

on category I routes

III  Rail corridors serving the ports of Pipavav, Mundra, 10

Chennai/Ennore, Vizag and Kochi and their hinterland.

 This category will also include all domestic traffic except

on category I routes.

IV  Rail corridors serving other ports like Kandla, New 10

Mangalore, Tuticorin, Haldia/Kolkata, Paradip and
Mormugao and their hinterland and all domestic traffic
routes.

 This category will also include all domestic traffic except

on category I routes

Since then, 14 new players, including Concor, have joined the fray. Of these players, 10 hold a
pan-India license while four have opted for a route-specific license, which entitles them to
operate only on NCR-JNPT route

List of private licensed container freight train operators:

License Fee
Sr. Name of Company Promoter Group Category Paid (Rs.
crores)

1 Adani Logistics Adani Group I 50

2 Central Warehousing PSU under the Ministry of I 50

Corporation Consumer Affairs & Public
Distribution

3 CONCOR I 50

4 Emirates Trading Emirates Trading Agency I 50

Agency

5 Gateway Rail Freight Gateway Distriparks I 50

6 Hind Terminals & Hind Terminals, Mediterranean I 50

MSC Agency Shipping Company

7 India Infrastructure & APL India, Hindustan I 50

Logistics Infrastructure Project and
Engineering

8 Container Rail Road DP World I 50

Services

9 Reliance Reliance (ADAG) I 50

Infrastructure
Leasing

National conference on Container Infrastructure in India 2012 Background Paper 30

10 SICAL Multimodal SICAL Logistics Ltd. I 50
and Rail Transport

11 Delhi Assam Delhi Assam Roadways IV 10

Roadways

12 Innovative B2B Bagadiya Shipping and Bothra IV 10

Logistics Solutions Brothers (P) Ltd.

13 Boxtrans (India) J.M. Baxi & Co. IV 10

Logistics Services

14 Pipavav Rail Gujarat Pipavav Port Limited III 10

Corporation

Source: Various sources

Looking at the licenses granted to the Rail Freight Operators, we can see that maximum
operators focus on the western corridor for JNPT-NCR route. This also sets tone for us to
confirm the proposed growth after implementation of the western corridor of the DFC

Interestingly, even though the transport through railways is quite cost effective, the railways
handle quite less amount of the cargo as compared to the roads.

To attain the target volumes of the container rail operators and to attract the volumes to
container segment, the provision of reliable, regular and integrated services is necessary along
with the last mile connectivity. Seamless transportation of goods is indeed the need of the
hour.

Proponents of privatization in the rail freight operations are also of the view that seamless
logistics can be achieved by the integrated hub-and-spoke model. The hub and spoke model
proposes to integrate various hubs by railway while the door-to-door delivery is given by the
road transporters.

Features of Rail Freight Operations

 Capital Intensive industry: Players have to invest into creation of an asset base comprising
of rakes, terminals (ICDs/ rail sidings), containers, container handling equipment, etc.

 Higher utilization and turnaround time: the average turnaround time in the domestic freight
typically stands at 3-4 trips (to and fro) in a month per rake, while turnaround times for
EXIM is around 7-8 trips (to and fro).

 Sidings are required for success of the hub-and-spoke model. The rail sidings/ ICDs act as
a hub for the rail connectivity. The hubs can also be utilized to provide value added
services such as warehousing, packaging, repairs, cleaning maintenance etc.

 Longer gestation periods along with promise of higher returns in the long time: A research
summarizes that on a base of 40 rakes and 4 ICDs at critical locations an operator has the
ability to generate above 14%. Still further gains can be achieved through faster turnaround
and usage of technology for operations.

National conference on Container Infrastructure in India 2012 Background Paper 31

Risks faced by Rail Freight Operators

Risks and Operational hurdles faced by the Rail Operators

Risks

1. The financial performance of the operators is dependent on the utilization of the facilities.
Considering this, the relative low handling of traffic will have a material impact on the
profitability

2. The turnaround time of the related CFS / ICDs have great impact on the turnaround of the
railway operator. Thus the business is in turn affected due to lower turnaround times

3. Availability of land for railways entails a great cost socially as well as economically. It
includes the excessive intervention and clearance from the Forest & Environment,
rehabilitation requirements and costs. These can hamper the project even if the location is
at an extremely strategic geography

4. Cost control for the capital expenditure is not possible. The operators have very limited
control over the largest cost component namely the rail haulage. The increase in the rates
on ad-hoc basis by Indian Railways is also a point of concern

5. So far, there is no independent arbitrator for dispute resolution between IR and the rail
operators. This is also a risk due to which many private players may back up from
investing in the facilities

Challenges

1. Maximum traffic is witnessed on the JNPT-NCR route.

2. Unreasonable haulage charge hikes by the railways are a cause of concern. This causes
much trouble as there is less time for the operators to absorb the charges in the view of
growing competition

3. Mismatch in the turnaround times due to congestion and lack of proper facilities for
loading and unloading of containers

4. Danger lies in the fact that the shift of cargo from road to rail may take some time which
may cause disruptions in the profitability and viability of the overall rail operations

National conference on Container Infrastructure in India 2012 Background Paper 32

Risk and return go hand in hand. We first accounted for the risks & challenges associated with
the rail operations business. However, we must not fail to appreciate the advantages that one
can gain by applying the newer methods of rail transport. The following table details the
advantages of private rail transport over the road transport:

How does Private Rail Transport fare over Road Transport – some findings!

1. Containerization brings the benefits of road transport to rail transport with respect to
flexibility and the size of cargo

2. Cargo such as iron & steel, electronic equipment, auto components, textiles, leather,
chemical, paper, yarn, metals, etc can be containerized and moved by container rail
operators through rail

3. A research reveals that over a distance of 1,000 km, freight costs are lower 20-25% for
cargo transported via the rail route

4. Heavy cargo preferred over light cargo load for rail movement. containers having lower
weight tend to become expensive to move by rail vis-à-vis road and vice versa

5. Companies can benefit through the Economies of scale on container rail movement. A
single rake can handle around 2,400 tonnes of cargo, while a single truck has the capacity
to carry 16-20 tonnes. Thus, to carry 2,430 tonnes, a road operator will require
approximately120 trucks.

6. Cost per ton for movement lower by above 35% as compared with roads

7. Transport via road entails additional time lapse in loading/unloading the containers as well
as more handling charges. This boosts efficiency with respect to time & stops pilferage &
other losses to a considerable extent

8. The railways are handled by a single operator due to which it is easier to for the materials
handling / logistics departments to maintain contact and stay updated about the exact
location and status of the containers. This also helps in reducing the documentation and
paperwork while ensuring the accuracy of the same.

National conference on Container Infrastructure in India 2012 Background Paper 33

Bibliography & References

1. Maritime Agenda : 2010 – 2020, Ministry of Shipping, Government of India

2. Deloitte Research

3. Observer Research Foundation's Issue brief - India's coastal security challenges & policy
recommendations, August 2010

4. Working paper on Policy for India‟s Services Sector‟, Ministry of Finance

5. Times Shipping Journal, various issues

6. Scheme and Guidelines for Financial Support to Public Private Partnerships in

Infrastructure

7. Investment in Infrastructure during the 11th Five year Plan, Secretariat for Infrastructure,
GOI

8. PPIAF, Port Reform Toolkit

9. Report of committee on Rail-Road Connectivity of Major ports

10. Review of Marine and Coastal Policies in India, By Dr. Sangeeta Sonak, Prajwal Pangam,
Asha Giriyan

11. Recent news articles

12. Websites of –

a. Ministry of Shipping, Govt. of India

b. Indian Ports Association (IPA)
c. Inland Waterways Authority of India (IWAI)
d. IBSA
e. Press Information Bureau (PIB)
f. Shipping Biz360

National conference on Container Infrastructure in India 2012 Background Paper 34

Contact

Deloitte IBK Media

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National conference on Container Infrastructure in India 2012 Background Paper 35

National conference on Container Infrastructure in India 2012 Background Paper 1
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