The ideal track to run India’s logistics system

Why in News?

• The PM Gati Shakti National Master Plan holds significant potential to boost railway infrastructure, speeding and expanding cargo transport, thereby reducing freight cost.

 

Background

• The Union Budget 2023 has doubled the PM Gati Shakti National Master Plan to States from ₹5,000 crore to ₹10,000 crore.
• It has also announced an outlay of ₹2.4 lakh crore for the Indian Railways, compared to ₹1.40 lakh crore in the FY22-23 and nine times the amount provided in 2013-2014.
• This is in line with target of increasing the share of the railways in freight movement from 27% to 45% and increasing freight movement from 2 billion tonnes to 3.3 billion tonnes by 2030.
• The PM Gati Shakti hence provides the right platform to address the infrastructural challenges that have hampered the movement of freight by rail.

 

PM Gati Shakti National Master Plan (PMGS-NMP)

• It is a central government project with an initial outlay of Rs 100 lakh-crore aimed to revolutionize infrastructure in India holistically.
• Launched in 2021, the plan is a transformative approach for economic growth and sustainable development.
• The approach is driven by 7 engines namely Railways, Roads, Ports, Waterways, Airports, Mass Transport, and Logistics Infrastructure.

 

Critical Importance of Railways in Logistics

• The Railways offer an efficient and economic mode of logistics movement given their pan-India network, and can play an important role in enabling a coordinated and integrated logistics system.
• The increased adoption of the railways as a mode for cargo movement is thus crucial to improve India’s logistics competitiveness.

 

What is the significance of PMGS-NMP in Railways?

• Globally, railway systems are heavily investing in advanced rail infrastructure for quick and low-cost container movement.
• For example, China uses special trains to carry containers that connect significant ports to the inland.
  • It also has dedicated rail lines to move container traffic and planned double-decker container carriages for greater efficiency.
• While the Indian Railways are upgrading their infrastructure, the PM Gati Shakti will help in continuous monitoring of existing projects along with identification of new priority areas.
  • This will help in achieving the targets of rail freight movement.

 

Overarching Share of Road Sector in Freight Cargo

• Currently, the modal mix in terms of freight movement is skewed by a considerable extent towards road transport, with 65% of freight movement by road.
  • It leads to an increased burden on roads, and, therefore, significant congestion, increased pollution, and resultant logistics cost escalations.
• Analysis of comparable costs of different forms of transportation suggests that freight movement cost is the highest in the road sector, nearly twice the rail cost.
  • However, the convenience of road transport has taken precedence over cost, and the railways in India have been losing freight share to other more flexible modes.
• Also, if an economy is served only by roads, its logistics cost is 17-18% of GDP and if it is served 100% by the Railways the logistics cost is 6-7%. 
  • In India this cost is about 13-14% of GDP, thus urging the need to emphasize upon rail sector.

 

Rise in Container Traffic for the Non-bulk Commodities

• Items transported in freight: In 2020-21, coal constituted 44% of the total freight movement of 1.2 billion tonnes, followed by iron ore (13%), cement (10%), food grains (5%), fertilizers (4%), iron and steel (4%), etc.
  • Transportation of non-bulk commodities thus accounts for a very small share in the rail freight movement.
• The convenience of moving non-bulk commodities in containers has led to an increase in containerised traffic over the last decade, growing from 7.6 million Twenty-foot Equivalent Unit (TEU) in 2008 to 16.2 million TEUs in 2020.
  • TEU is a unit of cargo capacity.

 

Challenges Faced by Railways in India

• The national transporter faces several challenges as follows which in turn leads to a shift of freight traffic to roads:
• Operational challenges: The increased transit time by rail and pre-movement and post-movement procedural delays such as wagon placement, loading and unloading operations, multi-modal handling, etc., hamper freight movement by rail.
• Infrastructural challenges: It includes the lack of necessary terminal infrastructure, maintenance of good sheds and warehouses, and uncertain supply of wagons
• This results in high network congestion, lower service levels, and increased transit time.
• Connectivity challenges: The absence of integrated first and last-mile connectivity by rail increases the chances of damage due to multiple handling and also increases the inventory holding cost.

 

Steps Taken by Government to Improve Railway Infrastructure in India

• The upcoming Dedicated Freight Corridors along India’s eastern and western corridors and multimodal logistics parks will ease the oversaturated line capacity constraints and improve the timing of trains.
• Around 125 rail projects have been identified for doubling or tripling of tracks since the launch of the Gati Shakti national masterplan.
  • To prioritise its projects under the PM Gati Shakti Scheme, the Ministry of Railways has also set up a new directorate under the Railway Board.
• This dedicated directorate of Gati Shakti will be responsible for planning, prioritizing, and implementing projects under the Gati Shakti Scheme in a time-bound manner.
• The Gati Shakti Cargo Terminals are being developed for handling cargos of railways and are decided based on demand from the industry and the potential of cargo traffic.
• The operating ratio of Railways has also stabilised at 98.22% against 107.39% in 2021-22. Operating ratio is the amount of money the railways has to spend to earn ₹100.
  • A lower operating ratio implies better financial health.
• The Indian Railways may also soon launch high-speed freight trains on the Vande Bharat platform, aimed at capturing high-value and time-sensitive cargo consignments.
• Government of India has also permitted 100 percent Foreign Direct Investment (FDI) in construction, operation and maintenance of suburban corridors, high speed train projects, dedicated freight lines, freight terminal, Mass Rapid Transport System etc.
• The Indian Railways is also considering the merger of all its rolling stock, wagon and locomotive manufacturing public sector undertakings into one unit.

 

Way Forward

• The Indian Railways need to improve infrastructure that is backed by adequate policy tools.
• It should also encourage private participation in the operation and management of terminals, containers, and warehouses to efficiently utilise resources.
• A special entity under the railways to handle intermodal logistics in partnership with the private sector should be established.
  • The entity could function as a single window for customers for cargo movement and payment transactions.
  • This will help in addressing the first and last-mile issue faced by the railways.
• Since there are two cargo wagons in each passenger train, one of these can be booked by the customer using an online application.
  • This introduction of an Uber-like model for one of the two cargo wagons could help in increasing the utilisation rate of these wagons.
  • The Indian Railways may keep operating the other wagon (the way it is done currently), until the success of the proposed model is established.
  • This could directly increase freight traffic without any additional investment in infrastructure.

 

Conclusion

• An integrated logistics infrastructure with first and last-mile connectivity is essential to make rail movement competitive with roads, and facilitate exports by rail to neighbouring countries such as Nepal and Bangladesh.
• Also, Railways being highly economical, there is need to move cargo away from roads to reduce the logistics cost of the country.

 

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Q1) What is Foreign Direct Investment?

A Foreign Direct Investment (FDI) is an investment made by a firm or individual in one country into business interests located in another country.

 

Q2) What are ULIP?

Unified Logistics Interface Platform, ULIP aims to bring all the digital services related with the transportation sector on a single portal.

 

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Source: The Hindu

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