India’s Inland Waterways Transportation

By Rohit Prasad Sarma | Manager, Supply Chain Design, Chainalytics | India faces some serious infrastructure, surface transportation and logistical hurdles that compromise its supply...


By Rohit Prasad Sarma | Manager, Supply Chain Design, Chainalytics |


India faces some serious infrastructure, surface transportation and logistical hurdles that compromise its supply chains: Inadequate, inefficient highways and railroads–largely a legacy of the British colonial era, developed to transport troops, agricultural products and raw materials–sprawl across 3.2 million square kilometres of varying topography.

India’s transportation infrastructure is plagued by skewed load concentration, overburdening and excess costs:

  • While some National Highway Authority of India (NHAI) highway and road projects have achieved limited success, the revamped Golden Quadrilateral—connecting India’s six largest metros–represents just 2 percent of India’s highway network, but carries over 40 percent of its freight.
  • Railways continue to starve for investment and modernization; about 75 percent of the railway network/infrastructure spanning 115,000+ kilometres is outdated, impacting freight metrics.
  • Current road/rail freight costs are about 7-8 percent of cost of goods sold (COGS)–among highest in the world, yet average daily freight speeds for road and rail are less than 330 kilometres and 300 kilometres  per day, respectively.                                                                        

It might seem like an inopportune time for India’s government to begin quietly revamping and modernizing a hitherto unutilized freight mode: inland waterways transport (IWT). But in fact, this is a strategic logistics move. It can help the country serve its 1.25 billion people, scattered across 90 percent of its landmass; come close to achieving the 10+ percent annual growth envisaged over the next two decades; and provide over 50 percent savings in overall freight costs.

How Inland Waterways Transportation Fits into India’s Logistics Future
IWT currently accounts for less than 1 percent of freight transport in India, compared with inland waterways in China (7 percent),  United States (8.3 percent), Europe (7 percent) and Bangladesh (35 percent). And while India’s logistics volume is currently skewed towards road and rail, the government is now focused on developing about 5,000 of the 14,500 kilometres of navigable waterways, six of which constitute–and are administered by–the Inland Waterways Authority of India.

India’s Changing Freight Mode Volumes & Trends

KPMG Graph April 2016

 

Currently, many of India’s inland waterways are undergoing terminal development, dredging and identification of private barge operators. Some inland waterways are already used for bulk movement. For example:

  • In Bengal’s coal belt, coal for thermal plants moves along a 300-kilometre stretch of the Ganges supplied via riverine barges.
  • Iron ore from Goan mines is transported to the Marmagoa port for export via barges on the Mandovi and Zuari rivers over a length of 80 kilometres.

India recently announced plans for 101 additional inland waterways over the next 30 years, facilitated by massive works currently in progress to link all the rivers across India.

A Summary of Existing Indian Inland Waterways

India's Inland Waterways graph April 2016

As a mini case study, let’s look at how using inland waterways could impact the transport of coal, India’s largest bulk commodity. India’s annual coal consumption is estimated approximately at 1.1 billion metric tonnes by 2017.

Economics of Transporting Coal across Freight Modes in India

Economics of transporting coal across freight modes in India

Source:  The Economic Times   HP = Horsepower

About 35 percent of this amount is to be imported and about 80 percent–approximately 880 million metric tonnes (MMT)–was transported for distances over 400 kilometres from the source  to the destination.

The matrix below shows comparative costs mode-wise (all values represent the opportunity for a mode shift for up to 880 MMT currently transported):

Comparative Average Freight Costs for Coal in India

Source:  Investment U

As the matrix shows, a minimum savings of $11.7 million per MMT-KM can be accrued by replacing rail with IWT.

The table below shows a range of plausible savings that can be achieved by shifting 10–50 percent of coal freight to IWT from rail:

Modal Shift from Rail to IWT

The horizontal axis in the table above represents the percent modal shift from rail to IWT. The vertical axis represents the average distance in kilometres that the freight undergoing mode-shift is transported across.

This modal shift offers an attractive proposition, since 40 percent of India’s population lives along existing waterways (NW 1 – NW 6). Another 30 percent of the population can be served after the new 101 waterways are developed in a few decades. That’s a very large market to service and a tremendous opportunity (between 500  million and 1 billion people).           

The growth of IWT in India has enormous potential, not only for reducing costs but improving service levels, reducing transit damage, and improving turnaround times for all modes of transport. Companies that offer value-added services will be an important part of the new IWT equation. Expertise in areas like barge/vessel bulk freight rate bidding and value assurance; multi-drop optimization for hinterland aggregation/disaggregation; last-mile connectivity; assessment projects for terminal design, optimal asset utilization, intermodal transfer facilities, process harmonisation, metrics setting, benchmarking, and improvement roadmaps; and secondary network design and hub modelling will all play a role in helping new IWT-enhanced networks to succeed.

A modal shift to IWT is critical to ensure an effective logistics network to support India’s booming growth. This dynamic becomes even more imperative as the “Make in India” initiative that aims to make India a global manufacturing hub gathers speed. IWT could be the game changer India has been waiting for in the decades to come, helping to solve its ever-increasing freight-movement-related woes and a masterstroke in revamping its notoriously slow and inefficient freight systems.

Rohit Sarma, Manager, Supply Chain Design, Chainalytics, has more than nine years of focused experience in supply chain consulting. His areas of expertise include transportation bid optimization, fleet optimization, network realignment assessment, logistics assessment, distribution requirement assessment, post-bid value analysis (transportation), transportation/distribution planning and analysis, inventory benchmarking, milk run consolidation, order-to-cash solution design, returns replacement and stock forecasting.

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