India: Effects of Tariffs and Nontariff Measures on U.S. ... - USITC

Trade Index 2008. Poor transportation networks in <strong>India</strong> effectively increase costs for
both domestic food products <strong>and</strong> imports <strong>and</strong> reduce dem<strong>and</strong> by limiting the number <strong>of</strong>
consumers that can be reached.
According to the Ministry <strong>of</strong> Road Transportation <strong>and</strong> Highways, 65 percent <strong>of</strong> freight
<strong>and</strong> 85 percent <strong>of</strong> passenger traffic is carried by road, a share that has been increasing. 85
Long-haul road transportation in <strong>India</strong> is characterized by long <strong>and</strong> unreliable transit
times; long-haul delivery times average approximately twice those in the United States. 86
A number <strong>of</strong> characteristics make transportation in <strong>India</strong> slow <strong>and</strong> expensive:
• The mixed traffic on most roads, consisting <strong>of</strong> bicycles <strong>and</strong> animal-drawn carts as
well as freight trucks <strong>and</strong> private automobiles, slows movement <strong>of</strong> freight by truck.
• The speed limit for trucks is typically 40 kilometers per hour.
• Congestion <strong>and</strong> the generally poor condition <strong>of</strong> many highways further increase
transport times, even on the national highway system. 87
• Only a small share <strong>of</strong> highways are limited access. 88
• Differing state regulations force truck traffic to stop at state borders <strong>and</strong> incur further
delays, accounting for 15–25 percent <strong>of</strong> transit time. 89
• Entry taxes imposed at state borders plus informal payments at checkpoints add
5–10 percent to the cost <strong>of</strong> goods transported between states. 90
• There is a lack <strong>of</strong> st<strong>and</strong>ardization in <strong>India</strong>n transportation regulations in areas ranging
from emissions to weight st<strong>and</strong>ards <strong>and</strong> driver <strong>and</strong> vehicle safety. Academic studies
<strong>of</strong> transportation regulatory st<strong>and</strong>ardization in other economies indicate that the longterm
cost <strong>of</strong> the lack <strong>of</strong> st<strong>and</strong>ardization is significant. 91
The absence <strong>of</strong> highway access for many rural <strong>India</strong>ns effectively eliminates them from
being potential customers. Many <strong>of</strong> <strong>India</strong>’s poor, particularly in rural areas, are not served
by year-round roads. This situation reduces the dem<strong>and</strong> for agricultural products from
outside the immediate area, particularly those that require refrigerated storage. Rural
roads are maintained by the various states, so the quality <strong>of</strong> rural roads varies widely. In
2000, approximately 40 percent <strong>of</strong> <strong>India</strong>’s villages, containing 74 percent <strong>of</strong> its rural
population, lacked access to an all-weather road; the 2008 World Development Report
85 Government <strong>of</strong> <strong>India</strong>, Ministry <strong>of</strong> Road Transportation <strong>and</strong> Highways, Roads & Highways: An
Overview (accessed April 6, 2009); L<strong>and</strong>es, The Environment for Agricultural <strong>and</strong> Agribusiness Investment
in <strong>India</strong>, July 2008, 30.
86 L<strong>and</strong>es, The Environment for Agricultural <strong>and</strong> Agribusiness Investment in <strong>India</strong>, July 2008, 30.
87 The national highway system accounts for only 2 percent <strong>of</strong> the road network but reportedly carries
40 percent <strong>of</strong> the all road traffic. Government <strong>of</strong> <strong>India</strong>, Ministry <strong>of</strong> Road Transportation <strong>and</strong> Highways,
Roads & Highways: An Overview (accessed April 6, 2009). One industry representative reported that the
poor state <strong>of</strong> the highways also means that packaging for products must be more robust, <strong>and</strong> therefore more
expensive. Industry representative, interview by Commission staff, New Delhi, <strong>India</strong>, May 26, 2009.
88 Limited access highways are those roadways with vehicle entrance restricted to a relatively small
number <strong>of</strong> points. Even most <strong>of</strong> the national highway system is not limited access.
89 World Bank, <strong>India</strong>: Road Transport Service Efficiency Study, November 1, 2005, 17.
90 Industry representative, interview by Commission staff, New Delhi, <strong>India</strong>, June 4, 2009.
91 World Bank, <strong>India</strong>: Road Transport Service Efficiency Study, November 1, 2005, 18–19.
7-17