Indian Logistics Sector

Strategic Assessment of Key Elements and

Opportunities

A Strategic Report by Infolitics

Co-authored by Mr. Anil Chawla of HS&SL

October 2, 2008

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Indian Logistics Sector: Strategic A ssessm ent of K ey Elem ents and Opportunities

Contents

Contents
Figures
Tables
1 Executive Summary
2 Critical Elements of Indian Logistics Sector
2.1 Structural Elements of Indian Logistics Industry
2.1.1 Cargo Import Steps and Important Logistics Elements
2.1.2 Cargo Export Steps and Important Logistics Elements
2.1.3 Other Logistics Elements
3 Strategic Growth Areas of Indian Logistics Sector
3.1 Cold Chain / Cold Storage
3.2 Air Cargo Logistics
3.3 Warehousing in India
3.4 Custom Bonded Warehouse
3.5 Distribution Centre (DC)
3.6 Road Transport Service Provider
3.7 Custom House Agents (CHA)
3.8 Project Cargo
3.9 ICD / CFS
3.10 Sea Ports
4 Analysis of Opportunities
4.1 Cold Chain Operations
4.1.1 National Opportunity Assessment and Value Chain
4.1.2 Breadth of Cold Chain Operations in India
4.1.3 Cold Storage Types and Storage Needs for various Commodities in India
4.1.4 Cold Storage – Components, Commodities to Store, and Operations
4.1.5 Sources of Finance for Cold Storage in India
4.1.6 Optimal Cold Storage Design
4.2 Air Cargo Logistics in India
4.2.1 Prominent Indian Airports – Volume and Volume Growth
4.2.2 Prominent Indian Airports – International Cargo
4.2.3 Cold Storage facility for Exports at Air Cargo Hubs
4.3 Warehousing in India
4.3.1 Warehousing Overview, Needs, Classification by Ownership and Services
4.3.2 Warehousing Documents
4.3.3 Warehousing in India – Stakeholders and Roles
4.3.4 Warehousing Opportunity in various Sectors

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4.3.5 Pharmaceutical Warehousing and C&F

4.3.6 Value added services in Warehousing
4.4 Custom Bonded Warehouse – Need in India and Opportunity Assessment
4.4.1 Overview of Custom Bonded Warehouse
4.4.2 Opportunity Assessment for Custom Bonded Warehouse
4.5 Distribution Centre (DC)
4.5.1 Opportunity Assessment
4.6 Road Transport Service Provider – Working Models in India, Revenues and
Opportunity Assessment
4.6.1 Overview of Business
4.6.2 Supply Chain (Interrelationships) in Indian Road Transport Service Industry
4.6.3 Revenue Earnings – Sources and Potential
4.6.4 Opportunity Assessment
4.7 Customs House Agent (CHA) – Market, Customer and Opportunity
Assessment
4.7.1 Market Analysis
4.7.2 Customer Analysis: End-users of CHA, Needs and Future Trends
4.7.3 Opportunity Assessment
4.8 Project Cargo – Working Model in India, Market Size & Growth, and
Critical Success Factors
4.8.1 Operating Model in Project Cargo Business – The Predominant Model
4.8.2 Market Analysis – Size and Growth of Market
4.8.3 Critical Success Factors of CHA Business
4.9 ICD/CFS – Market Analysis and Opportunity Assessment in India
4.9.1 Market Analysis of ICDs / CFSs
4.9.2 Opportunity Assessment – Container Traffic and EXIM
4.10 Sea Ports – Opportunity Assessment in Containerization and Infrastructure
Growth
4.10.1 Containerization – Market Size & Growth, Opportunities / Potential and Expected
Future Trends
4.10.2 Sea Port Infrastructure Growth
5 Financials
5.1 Cold Storage – Investment, Expenditure, Revenues and Profitability
Assessment through Scenario Analysis
5.1.1 Cold Storage Investment – Subsidized Investment Estimations
5.1.2 Cold Storage Revenues – Break-up and Estimations for Trading / Renting
5.1.3 Cold Storage Expenditure – Major Heads and Prevailing Rates
5.1.4 Projected Profitability of Cold Storage based on Scenario Analysis
5.2 Warehousing – Investment, Expenditure, Revenues and Profitability
Assessment through Scenario Analysis
5.2.1 Investment in a Warehouse
5.2.2 Projected Revenue Earnings from a Warehouse
5.2.3 Expenditure – Major Heads and Prevailing Rates
5.2.4 Projected Profitability of a Warehouse based on Scenario Analysis
5.3 Custom Bonded Warehouse - Investment, Expenditure, Revenues and
Profitability Assessment
5.3.1 Investment
5.3.2 Setting up a Custom Bonded Warehouse
5.3.3 Revenues and Profitability

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5.4 Custom House Agent (CHA) - Investment, Expenditure, Revenues and

Profitability Assessment
5.4.1 Investment in setting-up CHA Business
5.4.2 CHA Revenues
5.4.3 CHA Profitability
5.5 Project Cargo - Revenues and Profitability Assessment
5.5.1 Revenue Sources in Project Cargo Business
5.5.2 Profitability of Project Cargo Business
5.6 Road Transport Service Provider - Investment, Expenditure, Revenues and
Profitability Assessment
5.6.1 Investment – Procurement Cost of Trucks of Various Sizes and Additional Costs
incurred
5.6.2 Expenditure - Cost Breakdown, Estimated Annual Financial Operating Costs
5.6.3 Revenues - Freight Rates
5.6.4 Projected Profitability – Scenario Analysis for mix of various Revenue Streams
5.6.5 Additional Comments
5.7 ICD / CFS – Revenue Stream Analysis and Profitability
5.7.1 Revenue Streams of ICD/CFS
5.7.2 Revenue Analysis & Profitability of ICD/CFS
6 Conclusion – Overall Assessment of Opportunities
6.1 Parameters for Overall Assessment of Opportunities
6.2 Assessment of Opportunities
6.2.1 Assessment of Storage (Cold Storage / Warehouse) related Opportunities
6.2.2 Assessment of Critical Elements: Opportunity Matrix
7 Appendix
7.1 Inland Waterways of India
7.1.1 Inland Waterways Authority of India
7.1.2 National Waterways of India
7.2 Long Distance Freight Rate
8 Profiles, Abbreviations, Notes and Legal Conditions
8.1 Profiles
8.2 Abbreviations
8.3 Notes
8.4 Legal Conditions

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Figures

Figure 2-1 Steps in Import Cycle

Figure 2-2 Steps in Export Cycle
Figure 3-1 Industry Structure: Road Transport Service Provider
Figure 3-2 Market Size and Margins: Logistics Pyramid
Figure 4-1 Presence of Cold Chain Infrastructure in Supply Chain
Figure 4-2 Breadth of Cold Chain Operations in India
Figure 4-3 Indian Airports with High Cargo Traffic and High Change in Cargo Traffic
Figure 4-4 Percentage of International Cargo Handled at Prominent Airports of India
Figure 4-5 Necessity for Warehousing
Figure 4-6 Warehouse Classification on the basis of Ownership and Services Provided
Figure 4-7 Supply Chain Interrelationships of Road Transport Service Provider: Model 1
Figure 4-8 Supply Chain Interrelationships of Road Transport Service Provider: Model 2
Figure 4-9 Supply Chain Interrelationships of Road Transport Service Provider: Model 3
Figure 4-10 Supply Chain Interrelationships of Road Transport Service Provider: Model 4
Figure 4-11 Supply Chain Interrelationships of Road Transport Service Provider: Model 5
Figure 4-12 Preferred Model in Market for Project Cargo

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Tables

Table 3-1 Transportation Cost Break-up: Conventional Logistics

Table 3-2 Transportation Cost Break-up: Cold Chain Logistics
Table 3-3 Exports data of Four Major Airports of India
Table 3-4 Import data of Four Major Airports of India
Table 3-5 Number of Ports by State and Coastal Line
Table 4-1 Nation-wide Infrastructure Requirement for Various Logistics Units
Table 4-2 Cold Storage Properties and Shelf-life of major Fruits / Vegetables
Table 4-3 Storage Capacity and Revenue for Major Commodities
Table 4-4 Gujarat: Cold Storage and Export Potential of Various Commodities
Table 4-5 Gujarat: Major Commodities and their Selection Reason for Promotion
Table 4-6 Cold Storage Rooms with their Prefered Capacities for a 5,000 MT Cold Storage
Table 4-7 Freight and Mail Cargo Movement on Indian Domestic / International Route for last seven
years
Table 4-8 Container Port Traffic at Important Sea Ports of India
Table 4-9 Kolkata Port: Description, Activities/Facilities, Volumes Handled, Opportunities and Rules
Table 4-10 Paradip Port: Description, Activities/Facilities, Volumes Handled, Opportunities and
Rules
Table 4-11 Visakhapatnam Port: Description, Activities/Facilities, Volumes Handled, Opportunities
and Rules
Table 4-12 Chennai Port: Description, Activities/Facilities, Volumes Handled, Opportunities and
Rules
Table 4-13 Tuticorin Port: Description, Activities/Facilities, Volumes Handled, Opportunities and
Rules
Table 4-14 Cochin Port: Description, Activities/Facilities, Volumes Handled, Opportunities and Rules
Table 4-15 New Mangalore Port: Description, Activities/Facilities, Volumes Handled, Opportunities
and Rules
Table 4-16 Jawarhalal Nehru Port: Description, Activities/Facilities, Volumes Handled, Opportunities
and Rules
Table 4-17 Murmugao Port: Description, Activities/Facilities, Volumes Handled, Opportunities and
Rules
Table 4-18 Mumbai Port: Description, Activities/Facilities, Volumes Handled, Opportunities and
Rules
Table 4-19 Kandla Port: Description, Activities/Facilities, Volumes Handled, Opportunities and Rules
Table 4-20 Ennore Port: Description, Activities/Facilities, Volumes Handled, Opportunities and Rules

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Table 5-1 Investment for 5,000 MT Cold Storage Capacity

Table 5-2 Revenue Realization by Renting / Trading Commodities in Cold Storage
Table 5-3 Manpower Cost in a Cold Storage
Table 5-4 Electricity Expenditure in a Cold Storage for Negative & Positive Rooms
Table 5-5 Projected Operational Costs & Profitability for only Renting Model of Cold Storage:
Scenario - I
Table 5-6 Projected Operational Costs & Profitability for only Renting Model of Cold Storage:
Scenario - II
Table 5-7 Projected Operational Costs & Profitability for combined Renting and Own Use Model of
Cold Storage: Scenario - I
Table 5-8 Projected Operational Costs & Profitability for combined Renting and Own Use Model of
Cold Storage: Scenario - II
Table 5-9 Manpower Cost in Warehousing
Table 5-10 Projected Operational Costs & Profitability of Warehouse: Scenario - I
Table 5-11 Projected Operational Costs & Profitability of Warehouse: Scenario - II
Table 5-12 Procurement Cost of Trucks of Various Sizes
Table 5-13 Estimated Annual Financial Operating Expenses of Truck Operators
Table 5-14 Long Distance Road freight Rates (INR) in India for FTL
Table 5-15 Estimated Annual Financial Profitability of Truck Operators
Table 5-16 Profitability of Truck Operators for various Utilization Levels: Scenario - I
Table 5-17 Profitability of Truck Operators for various Utilization Levels: Scenario – II (a)
Table 5-18 Profitability of Truck Operators for various Utilization Levels: Scenario – II (b)
Table 6-1 Opportunity Matrix: Storage (Cold Storage / Warehouse) related Opportunities
Table 6-2 Opportunity Matrix: Assessment of non-storage related Opportunities
Table 7-1 Long Distance Freight rates (US$) in India for FTL
Table 8-1 Meaning of Abbreviations and Terms Used in Report

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1 Executive Summary

India is one of the fastest growing economies of the world today. This growth is fuelled by growth in
infrastructure, booming manufacturing sector, EXIM trade, retail and agricultural related activities amongst
others. Logistics assumes central activity in these growth areas. In India logistics cost, as a proportion of
GDP, stands today at 13 per cent which is set to rise as the Indian economy shifts from service oriented
economy to that of non-service activities, like, manufacturing and food-processing etc. Rural logistics is
set to contribute a larger share to this increase as the infrastructure related to agricultural activity unfolds.

With rising disposable income, changing lifestyle, focus of government and private sector on rural and
agricultural related activities, the rural logistics has received special attention in the past two to three
years. Rural logistics, though lucrative, has a number of challenges which makes it difficult to tap the
opportunity. Development of cold chain / warehousing infrastructure, thus, remains at the core of the
government’s plan to enable growth of rural areas, provide employment opportunities for rural youths,
meet India’s growing food demand etc. Similar is the trend in cities which have witnessed changing
lifestyle and shift to consumerism which is further fuelling national intra-trade activity and thus the logistics
sector.

Indian economy is opening up and one recent step in this direction is the signing of India-ASEAN trade
agreement which will likely to push trade through Eastern Coast of India many folds. The inclusion of
India into Nuclear Suppliers Group (NSG) and civilian nuclear co-operation agreements with USA and
France, and another one in pipeline with Russia is a pre-cursor to the increase in trade activities with
major powers of the world. By 2030, the economic benefits that will accrue to India’s economy, as a result
of the nuclear trade could touch US $500 billion. Further, the government is strengthening the
infrastructure with over US $70 billion of investment planned till 2012. Logistics will be one sector which
will be the backbone of flourishing trade activity and infrastructure development, and will receive special
attention by the government / private sector in coming years.

There are a number of activities in the Indian logistics sector which are broadly classified under
‘Hardware’, ‘Services’ and ‘Technology’ related activities, however, not all of these activities are core to
the growth of the sector. Indian logistics sector offers unique opportunities which are mainly driven by an
opening and near double-digit growing economy, and lack of infrastructure in key areas. It may be noted
that although, lack of infrastructure acts as an inhibitor, but the dearth of adequate infrastructure also
presents unique opportunities to players who are ready for the situation and understand the market. This
report identifies such elements which are growth engines of the Indian logistics sector and focuses on
understanding opportunities related within these elements.

Identifying strategic logistics elements requires one to understand the supply chain and value chain,
EXIM trade elements and their role, government policies and subsidies etc to identify the most critical
elements. The report begins with identification of such strategic elements which are then studied in deep
for each element to find market structure, growth drivers, barriers to entry, rules / government policies
applicable to the market, competition threat and opportunities. Financials are discussed with possible
scenarios and their financial / technical analysis, wherever required.

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Indian Logistics Sector: Strategic A ssessm ent of K ey Elements and Opportunities

The report identifies ten such strategic growth areas of Indian logistics sector which includes:

1. Air Cargo Logistics

2. Cold Chain / Cold Storage
3. Custom Bonded Warehouse
4. Custom House Agents (CHA)
5. Distribution Centre (DC)
6. ICD / CFS
7. Project Cargo
8. Road Transport Service Provider
9. Sea Ports
10. Warehouse

Containerization and rail based logistics are other major strategic growth areas of Indian logistics sector
and these are studied under various strategic elements mentioned above, wherever they impact.

The ten strategic elements, mentioned above, are analyzed in detail by understanding data of each sector
collected through credible sources and / or primary interviews. Financial outlay, technical competency,
return-on-investment, competition analysis and difficulty of implementation are some of the main
parameters which will further help identify the right opportunity and rank them through an ‘Opportunity
Matrix’. These are some of the external parameters that need to be mapped with internal strengths,
capabilities and tie-ups or collaborations of an organization to arrive at the most compelling opportunity to
pursue. These are largely a function of each company and the report, therefore, analyzes opportunity on
the basis of external factors on a macro level with specific illustration of state / city level logistics activities
to provide appropriate insights and analyze scenarios.

This report is one step ahead in understanding the strategic elements of Indian logistics
sector as it delves into each strategic element and identifies opportunities, rather than
skimming over the logistics scenario by reporting facts, figures and new developments.
The report provides insights which can be used to understand the sector and directly
assess a particular sector opportunity.

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Profiles, Abbreviations, Notes and Legal Conditions

Profiles

D N P Inform ation & A nalytics Pvt. Ltd. (Infolitics)

Infolitics provides Business Research / Consulting services to organizations around the world.

Business Research: Infolitics provides customized solutions to client problems. Business Research
services provided by Infolitics assist clients in taking better business decisions.

Consulting Services: Infolitics provides consulting services in Business Process Transformation /

Business Process Re-engineering by helping clients aligning their processes with strategic goals and
designing new processes. We also provide consulting in emerging areas like Logistics and Retail.

The team has experience of working with clients from across the globe including Fortune 500 clients.
They have collectively worked on more than 300 client projects.

Website: www.infolitics.com
Contact Person: Mr. Pankaj Kandhari (Mobile +91-98199-85859)
E-mail: pankaj.kandhari@infolitics.com

H industan Studies & Services Ltd. (H S& SL)

HS&SL, incorporated in 1992, is a research and consultancy company providing services to clients
across the globe.

HS&SL understands India, Indian business, Indian markets, Indian laws and Indian ethos.

HS&SL’s primary business is Strategic Business Research. They have done significant work in the
field of Foods, Beverages and Ingredients. But, they also work in other fields.

In addition to business research, the company is involved in technology development and training of
manpower.

Simplicity, clarity and aversion to jargon are their hallmarks. They never lose holistic strategic
perspective of client's business and needs.

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Website: www.hindustanstudies.com
Contact Person: Mr. Anil Chawla (Mobile +91-94250-09280)
E-mail: info@hindustanstudies.com

1.1 Abbreviations

Table 0-1 Meaning of Abbreviations and Terms Used in Report

Term / Abbreviation Meaning or Explanation

ICD Inland Container Depot

CFS Container Freight Station

CHA Custom House Agent

NIC National Informatics Centre

FF Freight Forwarder

DC Distribution Center

LCL Less-than-Container-Load

FCL Full Container Load

FCI Food Corporation of India

CWC Central Warehousing Corporation

SWC State Warehousing Corporation

Octroi A kind of government tax in India levied on goods imported

ODC Oversize Dimensional Cargo

EXIM Export-Import

CA Controlled Atmosphere

NHB National Horticulture Board

AEZ Agricultural Export Zone

MAP Medicinal and Aromatic Plants

A term in Hindi denoting a common place for trading of agricultural

Mandi
produce, generally in wholesale format

Thekedari A term in Hindi denoting ‘On contract basis’

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Toll Naka Check points at city / state limits, primarily for collection of taxes

MOFPI Ministry of Food Processing Industries

NCDC National Cooperative Development Council

NABARD National Bank for Agriculture and Rural Development

EOU Export Oriented Unit

JIT Just-In-Time

MTO Multimodal-Transport-Operators

ASEAN group comprises of Brunei, Cambodia, Indonesia, Laos,

ASEAN
Malaysia, Myanmar, The Philippines, Singapore, Thailand and Vietnam
BEP Break-Even-Point

IWAI Inland Waterways Authority of India

1.2 Notes

1. Data in the report is presented in US$. The conversion rate used is 1 US$ = INR 40.

2. The conversion rate used in this report may have some deviation with the prevailing currency
conversion rate depending on day-to-day inter-banking rates

1.3 Legal Conditions

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