While India has made great progress in the terms of infrastructure, there still are challenges. Even though the efficiency of road connectivity and ports has increased over the years, the interface between ports and inland movement remains a bottleneck that includes issues such as customs processing, container freight stations and the connectivity between railways and ports.
The Core’s founder and financial journalist Govindraj Ethiraj spoke to Vinayak Chatterjee, infrastructure expert and founder of the The Infravision Foundation, on challenges of India’s infrastructure and milestones achieved so far. Chatterjee is confident about India’s ability to absorb and accelerate investments. The combination of the new National Logistics Policy (NLP) and Gati Shakti, according to Chatterjee, address the interface challenges effectively.
“Gati Shakti which is a massive software programme and I think India is the only country that has it. It has 13 levels of data from stuff below the ground like optic fibre cable, gas pipelines, etc to stuff on the ground and above,” he says, adding that it addresses the last mile connectivity problem.
Here are some of the edited excerpts of the interview:
We are seeing a lot of investments into India particularly in the manufacturing space, a lot of which is being led by productivity- linked incentives. We are looking at domestic investment as well and are pushing for more. And that includes in infrastructure as well. To make sure that all of this works efficiently and these investments deliver in terms of integrated supply chains, efficient movement of goods, we need high quality infrastructure and to some extent we have it already. But how are we placed as we look ahead given our ambitions?
One is infrastructure as hardware and the other is infrastructure as supporting services. Now, if you take a look at the key elements of infrastructure today and core infrastructure, I do not think there is any manufacturer in India current or potential, who is complaining about roads. In fact the distance on road travel, the ease, the introduction of multi-axle trucks, introduction of Goods and Services Tax (GST) and reduction of border check posts. No entrepreneur is complaining about roads. So, I can reassure you that roads are not a bottleneck or a concern area.
If you look at the next most important element which is ports, to get the raw material in and get the finished product out, I have recently written an article in Business Standard called the ‘Renaissance of Indian Ports’ . Very few people know that between standalone ports and berths and terminals within the major ports, India since the early 2000s, has actually seen 83 projects where private capital has come in—both domestic as well as international players like DP World and Port PSA, etc. It is now very well known that Indian ports have reached a well-accepted level of efficiency. One of the indicators they have is ASTA–the average ship turnaround time. In the bad days in the late 80s, it used to be about 8 days and all international freight forwarders and shippers would say: how inefficient are your Indian ports. Today, ASTA is down to two days and in some cases it is as good as 17 hours, in some container ships. So ports to my mind is not an issue.
What really is a bottleneck today is the interface between ports and inland movement which is the interface and the time spent in processing. You know the customs and pre and post berthing issues, container freight stations, the interface of railway with port, the interface of road with port, it is congested etc. There is an interface issue which still requires sorting out and I will go back to that later.
India does not have a great constraint on air capacity for manufacturing because we really do not export too much. It is not an economy that is sending huge tonnage of fruits and vegetables or perishables or medicines by air. But having said that, Indian airports as you and I know have come of age and many of them are ranked as, at least from a passenger point of view, as some of the best in terms of service provisions in the world. Over and above, the regional airport scheme targets about 200 airports. Minister Jyotiraditya Scindia has recently announced about 200 airports in the next 5-6 years. So, the penetration is high, and therefore even some of the plants in the backward areas should face far less encumbrances moving their people and goods.
Now, you have rail and rail is moving at a fairly high space in terms of upping its service standards for the movements of goods. The introduction of the dedicated freight corridor West is soon going to be operational. That will transform rail movement from Northern and Western India to Mumbai ports. The Eastern dedicated freight corridor is also nearing completion and they have identified 5-7 other freight corridors like Chennai, Bengaluru, etc. So rail is taking freight seriously and the National Rail Plan envisages recapture of cargo which has come down to 28% from 40%.
So if I now move to the services sector, infrastructure as services, there I already mentioned that it is the interface issues of multi-modalism, of port-rail-road connect, which are today the problem areas. And therefore the government has taken two major steps. One Gati Shakti which is a massive software programme and I think India is the only country that has it. It has 13 levels of data from stuff below the ground like optic fibre cable, gas pipelines, etc to stuff on the ground and above. I do not want to get into the major stuff on Gati Shakti but just to say, Gati Shakti addresses the last mile connectivity problem that I mentioned which is still waiting to be fully addressed. Finally, you are aware that the government a few months ago launched the NLP (National Logistics Policy), which intends to bring down India’s cost of logistics from 13% of GDP to 8% of GDP. The NLP has a major software programme embedded in its activities called ULIP—Unified Logistics Interface Platform—for freight forwarders and cargo movers to trace their cargo from point of origin to point of export or point of where they have to reach.
Now all these forces are coming together and therefore the fundamental answer to your opening question is: I do not think infrastructure is a bottleneck for potential investors in India or even existing manufacturers in India.
You are saying that we are well-geared to absorb and accelerate. On the softer side, you talked about the interface challenges. Part of that could be to do with regulation and laws and the other part could be to do with technology and the better application of it. Between the two, what are you betting on?
I am certainly betting on technology. Gati Shakti is one of the most fantastic IT platforms that integrates physicals and I am told that freight forwarders that everybody has started to integrate, even private players who move cargo have started linking their portals and their activities to the NLP called ULIP. So both of these are technical plays.
I don’t think there is a great issue on rules and regulations. I just feel that the interface issue which was in the past, India undertook many projects on an isolated stand alone basis. We set up a port without worrying about its connectivity. We set up a hydro electricity plant in the North-east without thinking when the transmission lines would be ready, even in interior Rajasthan. So, earlier the projects were set up rather on a silo individual basis without application of mind on cross connections or required connections because they were kind of mired in inter ministerial issues. But the combination of Gati Shakti and NLP I think goes to the root of the problem and addresses that.
If I were to now look ahead, in the context of the kind of investments we are talking about or want to get, I am almost getting a sense that now you are saying that there is a reverse gap—-as in we well have more infrastructure capability and than maybe investments
In ports we certainly do. In the next five years or so in my mind, I would urge policy makers in India’s infrastructure to actually concentrate on the software side of increasing efficiency. And as I said, Gati Shakti is a software that addresses the physical side, better connectivity, and ULIP and other interventions are addressing the coordination issues. It is interventions like these that we need to further increase for efficient movement of goods. What effectively people are looking at.
India also has some broader agenda—there is a bid coming up in Andaman. For the first time, India is going to set up a transhipment container terminal in the Galathea Bay in Great Nicobar. These are major moves that would make India a key player in the transhipment business also because today all our containers are transhipped at Colombo, Dubai or Singapore. So there are some very strategic moves afoot.
That is almost 75% transhipment plus is outside India right? Would that bring some of the business back to India?
Yes. It should because as you are emerging as the world’s third largest economic player, one thing that worries me, and I have raised this to the government a number of times, how is it that we do not have Indian shipping lines of international size and stature. We are completely dependent a country with the Japanese, the Scandinavian and European line and US lines. It is about time that India has three very large national fleets and a higher share of transhipment within our own maritime boundaries. These are issues to work on.