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FDI - WINDOW OF OPPORTUNITY<br />
away from warehouses in different states to create new<br />
regional warehouses based on operational and logistics<br />
efficiency and further employing third-party logistics<br />
companies to manage their overall distribution and supply<br />
chains. Besides, the rollout of GST would drive<br />
consolidation of warehousing space across the country,<br />
improvement in efficiency of road transporters and would<br />
develop supply chain management.<br />
Government’s initiatives to boost cargo through<br />
shipping & railway<br />
Government has been taking several initiatives to<br />
increase the cargo transport market share of railway and<br />
inland water ways. Currently road freight accounts for<br />
54% of total freight followed by railway (33%) and costal<br />
shipping (6%). As per government estimates, for the 14<br />
major routes to North West region, only 38% is moved<br />
through rail. Freight trains take 2.5 times more than<br />
passenger train to cover the same distance and thus the<br />
road still dominates the container movement. The key<br />
challenges the rail transport face are high turnaround<br />
time and low speed of freight trains. Government is<br />
looking to improvise on these challenges by targeting fast<br />
track implementation of DFCs, increasing the allocation of<br />
investment, developing Multimodal Logistics Parks and<br />
Industries and rationalized the rates for DFC. In a move to<br />
attract import freight traffic including containers, coal and<br />
iron ore that was diverted to roads, Indian Railways has<br />
recently withdrawn the 10% Port Congestion Surcharge<br />
on basic freight which was imposed during November<br />
2014. The rollback is expected to improve the<br />
competitiveness of rail freight over the roads.<br />
Recently Shipping ministry announced that they have<br />
planned to offer companies an incentive to Rs 1 per<br />
tonne to transport goods, including food grain,<br />
automobile, cement and other commodities through<br />
inland water ways and costal shipping. The ministry<br />
conveyed that the incentive will be given to industry for<br />
switching to cleaner transportation like inland water ways<br />
and costal shipping from railways and roadways. The<br />
incentive offer would cost government Rs 100-150 crore<br />
per year as per shipping ministry. Such initiatives from<br />
government will encourage the freight movement through<br />
shipping as only 6% of freight transported in India is<br />
carried by costal shipping as compared to 11% and 24%<br />
for Germany and China, respectively. A shift from roads<br />
and railways to costal shipping could lead to emission<br />
savings of about 3.5% in the freight transport sector.<br />
Government also suggested for reducing the cost of costal<br />
shipping by changing cabotage law, under which only<br />
Indian registered ships are allowed to ply on local routes<br />
for carrying cargo. As per shipping ministry, the incentive<br />
would help to increase the transportation of petroleum, oil<br />
& lubricants, coal, steel and cement by costal shipping<br />
from 6% to 12% in a span of a decade and result in<br />
potential savings of Rs 35,000-40,000 crore by optimizing<br />
export-import freight and domestic cargo. Government has<br />
set an ambitious target to increase the share of waterways<br />
transportation from 6% to 10% by 2020 and to reach<br />
this target, shipping ministry has been taking several<br />
initiatives such as moving to larger barges and use of<br />
liquefied natural gas instead of diesel barges and<br />
dedicated berths, bunkering and storage capacities at<br />
relevant ports. The shipping ministry also suggested the<br />
imposition of green taxes on less environmentally friendly<br />
modes of transport such as roadways which would<br />
increase freight share of costal shipping due to low cost<br />
of transportation. Ministry also highlighted some of the<br />
key competitiveness of shipping transport like<br />
transportation by waterways cost 25 paisa per km as<br />
compared with Rs 1.50 and Rs 2.50 for rail and road<br />
transport and in terms of load capacity one horsepower<br />
can carry four tonnes of cargo by waterways, while the<br />
equivalent is 150 kg and 500 kg by road and rail,<br />
respectively. Thus, government’s thrust to improve logistic<br />
infrastructure in shipping and rail by taking several<br />
initiatives would reduce transport cost and would maintain<br />
benign inflation environment.<br />
Investment allocation by Indian Railways (Rs in billion)<br />
8,560<br />
2,557<br />
1,539<br />
225 285 533<br />
FY91-95 FY96-00 FY01-05 FY06-10 FY11-15 FY16-20<br />
Source: Indian Railways<br />
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