Efficiency boost needed for national highways
Transport Corporation of India Ltd (TCIL) in association with IIM-Calcutta has brought out a study report on ‘Operational Efficiency of National Highways for Freight Transportation in India’. Construction Week India presents the executive summary of the report
This project was commissioned by Transport Corporation of India (TCI) to assess the impact of government investments in national highways on the operational efficiency of freight transportation by road in India. The objectives of the project were to:
(a) analyse data for 10 major routes to assess the operational efficiency of freight transportation, (b) compare and benchmark with key freight transportation statistics of other countries, and (c) suggest recommendations for transporters and the government as to how to overcome the problems faced by the industry.
Data for the 10 routes was collected by TCI throughout the year 2008 and the complete data set was made available for analysis in early January, 2009. Primary data was complemented by secondary information available in published reports and various websites. Discussions with senior officials of TCI in Delhi and Kolkata also provided significant inputs for the project.
The Indian trucking sector contributes about 4.5-5 % (US$ 55-60 billion) of the GDP. However, the sector is plagued with many problems. The first and foremost problem faced by the sector is the paucity of good-quality highways and expressways.
While road freight volumes increased at a compounded annual growth rate (CAGR) of 9.06 % and the number of vehicles (all types) on Indian roads increased at a CAGR of 10.13 % during the period 1950-1951/2007-2008, the GDP at market price grew at a CAGR of only 7.35 % during the same period, indicating that road freight volumes and the number of vehicles (all types) grew at faster rates compared to the GDP during this period.
The total length of roads, on the other hand, increased at a CAGR of only 3.77% during the period 1950-1951/2007-2008, implying thereby that the growth in roads has not been able to keep pace with the growths in road freight volumes and the number of vehicles (all types) on Indian roads during the same period.
Today, national highways constitute only 2% of the total road network, but carry 40% of the road traffic. Highways are also not access-controlled allowing humans, animals and all types of vehicles simultaneously, which results in slow speed of vehicles, uncertain journey time and accidents.
Poor maintenance of roads also leads to slow speed, equipment breakdown and accidents.
The second major problem faced by the sector is interstate and intrastate check-post delays. Since different states have different documentation requirements for sales tax compliance, a considerable amount of time is wasted at interstate check-posts for completing sales tax-related formalities.
Besides, delay is experienced at check-posts and on-road for filling in forms required by various government departments, checking of documents and physical checking of the vehicle, driver and consignment by RTO and traffic police, and collecting highway toll and taxes.
On top of this, there are police harassment and corruption soliciting unofficial payments from drivers. Survey data shows on-road stoppage expenses (Toll/RTO/ST/Octroi, etc.) including unofficial payments made to government officials and traffic police amount to, on an average, 15 % of total trip expenses.
The sector has its own share of problems. It is highly fragmented with 80 % of it being accounted for, by the unorganised sector. On one hand, there are diseconomies of scale due to small size of operators. On the other hand, these small operators collude with corrupt officials and police, and flout all rules and regulations, evade taxes, resort to overloading of vehicles and indulge in other unethical practices.
Since organised players have to directly compete with small operators, there is immense downward pressure on pricing. Also, because India has one of the lowest freight rates in the world, transporters make little margins or even losses.
Reports indicate, unorganised players make about four to 5% and organised players make about 10-15% margin. With this little margin, transporters have few options to invest in assets and technologies. Vehicles that ply on Indian roads are old and fuel-inefficient, and need immediate replacement. There is inadequate adoption of information technology for tracking shipments on a real-time basis, leading to poor service quality.
Problems are compounded by the fact that the sector is yet to receive industry status, which makes it difficult for transporters to raise capital and debt through organised banking and financial channels. Lack of skilled manpower is another concern for transporters.
Poor road conditions, check-post delays and old vehicle fleets result in a daily coverage of maximum 250-400 km by a truck compared to 700-800 km in developed countries. While a truck on Indian roads can cover only 60,000-100,000 km in a year, in US a truck can travel up to 400,000 km in a year. The average speed of trucks in India is merely 20 km per hour, which was also confirmed by the present survey.
The survey found that stoppage delay as percentage of journey time varied between 5% and 25%, and was very much dependent on the characteristics of routes. Costs of delay were also estimated and found not to affect margins by significant amounts. However, a conservative estimate showed that the annual cost of delay to the economy was of the order of Rs30 billion (US$ 600 million). Similarly, another estimate was made on additional fuel consumption due to stoppages and slow speed of vehicles, which indicated that had the mileage of vehicles been at desired levels, the annual savings to the economy would have been of the order of Rs240 billion (US$ 4.8 billion).
The study recommends that the government should invest heavily in extending, widening and upgrading the highway network, build more high-quality arterial roads, implement access-control mechanisms and allocate adequate funds for road maintenance.
Private participation may be actively sought in for road development and maintenance through Public-Private Partnerships (PPP). The government may expedite the introduction of uniform Value-Added Tax (VAT) across all states that would reduce paperwork and check-post delays significantly.
Also, a system similar to the TIR Carnet system prevailing in the European Union (EU) that requires no checking of consignments, sealed at the origin, at interstate check-posts may be adopted to facilitate smooth flow of high-value, perishable and time-sensitive items.
Electronic tolling systems may be introduced and investments that are required to be made by transporters may be subsidised by the government. Rules and regulations have to be strictly enforced by the government officials and traffic police to avoid evasion of tax, overloading and other unethical practices by drivers. Offenders should be handed out exemplary punishments.
The government may consider according to the industry status for road transportation so that transporters can avail the benefits of being part of an industry.
Construction of more transportation hubs and logistics SEZs should be initiated to create more common, shared facilities for transporters. Multi-modal transportation involving rail and road that not only reduce transportation costs through economies of scale, but that also saves precious fuel may be encouraged, where the last mile connectivity would be provided by road.
Transporters may be encouraged to replace existing old vehicles with multi-axle tractor-trailer units that would reduce fuel consumption, save transportation costs, create less damage to roads and emit less pollution to the environment. Transporters may be provided with tax breaks and/or reduced toll rates to facilitate purchase of relatively expensive tractor-trailer units.
Driver training institutes may be set up and periodic training of drivers on vehicle maintenance, road safety, hygiene standards and health hazards may be made mandatory for driving on highways. To deal with the problem of skilled manpower shortage, the government may spread awareness by organising workshops/seminars/conferences in collaboration with academia and industry associations.
Courtesy: Transport Corporation of India Ltd