Indian Institute of Management

Nagpur

Overview of Logistics Industry: Vidarbha Region

GROUP 7
Sameer Bhajni
Shardul Kaushik
Utthra Ramchandran
Dhruv Sonagara
Viral Satra

P16008
P16026
P16044
P16052
P16058

Overview of Logistics Industry: Vidarbha Region

Overview of Logistics Industry: Vidarbha Region

INDEX
1.

Introduction

2.

Current scenario and trends in the logistics industry 1

3.

Distribution Channels & Logistics Infrastructure

4.

Logistics Market Summary

5.

Government initiatives and regulations governing logistics

6.

Opportunities and Challenges in Logistics Industry

7.

Observations 8

8.

References

4
6

Page 3 of 8

1. INTRODUCTION
Logistics is the backbone of a countrys trade and economy. A logistically well connected region provides
tremendous scope to service the requirements of both local and international markets. The logistics industry has
opportunity to leverage technology and innovation not only in infrastructure, but also in reducing costs and
ensuring quick and reliable services. While the logistics spend in India is currently around 14.4% of the GDP, the
sector is expected to grow at a CAGR of 12.17% by 2020, subject to the implementation of reforms like the GST
(Novonous, 2015). It presents untapped potential and a tremendous room for development. Various Government
policies that govern this sector will have direct impact on success of initiatives like the Make in India, Start-up
India, Stand up India and other campaigns. The development of the transportation and logistics sector also plays
a major role in supporting the growth of exports.
The Vidarbha region is located in Central India and includes the Nagpur and Amravati divisions in the state of
Maharashtra. The districts of Nagpur, Bhandara, Chandrapur, Gondia, Gadchiroli and Wardha are included in the
Nagpur division, while the Amravati division comprises the districts of Akola, Buldhana, Washim and Yavatmal.
The Vidarbha region is known for its rich reserves of important minerals like coal, iron ore, manganese, etc., as
also its extensive forest area and strong agricultural presence. It is the major source of coal reserves in
Maharashtra, and is the Power Hub of the state. Vidarbha constitutes nearly
60% of the total electricity generation in Maharashtra (MSME Development
Institute, 2015). Given the abundant availability of raw material and resources
supported by public and private investments, Vidarbha region has seen growth
of
various industries like food processing, cement, textile, logistics, metal,
engineering, power and energy.
With the rapid growth of the primary industry in Vidarbha region, the demand
for
logistics services is high. Because of the strategic location of the area, it can
serve as a logistics hub for the FMCG market in India. The country is set to
witness growth in logistics industry because of the increased economic
activity between states and the Governments focus on the ease of doing
business. Also, with the increase in the per capita income of the nation, the
demand for consumer goods is constantly growing. Logistics infrastructure
then
plays an important role in bridging the supply-demand gap. Moreover, with high availability of unskilled labour
and low cost of living in the region, the working capital for the industry is comparatively low. Thus, it can very
well be at the heart of the logistics infrastructure of the country.
This report, by way of secondary research, aims at providing an overview of the logistics sector in India and
contribution of the Vidarbha region as a logistics service provider. The following chapter provides a summary of
the current scenario and existing trends in the logistics sector. It also discusses the growth of the logistics sector
in the country, which can directly impact and add value to accelerate growth in manufacturing and other sectors.

2. CURRENT SCENARIO AND TRENDS IN THE LOGISTICS INDUSTRY

The Indian logistics industry, as with others, deals with the inward and outward sections of the manufacturing and
service supply chains. It includes order processing, packaging, labelling, warehousing, inventory management,
freight transportation, distribution and customer support. Figure 1 shows a typical supply chain that is serviced by
a logistics provider.

Raw
material
supplier

Manufacturer
/service
provider
(Unloading,
Inward)

Distributor
(Packaging,
loading,
Outward)

Wholesaler
(Warehousing)

Retailer

Consumer

Figure 1
India is slated to grow at 7.6% in 2016-17 as per World Banks estimates. To keep up with the growth in
industries that aim at delivering performance beyond capacity, the logistics infrastructure very often, has to
stretch beyond its limitations to deliver value. The logistics industry in India has evolved constantly from being a

labour intensive sector part of manufacturing firms, to one that is open to new technology, and having
independent players to service the demand, i.e. more business entities are looking at engaging third party logistics
providers (3PL) to meet their requirements. This has helped manufacturing and service firms focus on their core
competencies and improve their operations & supply chain. The focus today is not only on optimizing existing
processes and costs, but also on providing value added services like database management, collection of
payments, scheduled deliveries, documentation, transit insurance services, etc.
The
main
Inward
components
in
the
Business
Material
Shipment
Planning
industry
are
Forecasting
Procurement
Raw/Packagin
freight
and
g Materials
passenger
transportation by
roadways,
railways,
Outward
waterways,
Shipment
Scrap Disposal
Production
Warehouse
airways as also
Raw/Packagin
storage
and
g Materials
warehousing. The
maximum
contribution to the
industry
comes
Sales
Outward
from
freight
Warehouse :
Shipment of
Order
transportation and
Seggregation
Distribution
Finished
Completion
storage.
for
goods
Roadways are the
Figure 2:Distribution
Value Chain of a logistics Service provider
most prominent
modes of transport for freight and comprise nearly 61% of the total freight and 85% of the passenger
transportation services requirement (EBTC, 2013). Investments by the Government in logistics infrastructure and
involvement of private sector play a major in development of all three logistics segments.
The key factors that drive growth in the logistics industry include rapid growth in industries like automobile,
textile, food & beverage, pharmaceuticals and fast moving consumer goods. Additionally, increasing
globalization & growth in trade ensure generation of inter-border demand for logistics services. Many global
integrated logistics players are exploring the Indian logistics market and entering the multi-modal services market
owing to increased demand from end users, largely by way of mergers and acquisitions and joint ventures with
local players.
The Vidarbha Region, by way of its central location, has the potential to be the logistics hub of the country.
Nagpur has an international airport and Container Corporation of India (CONCOR) depot. Amravati also has an
airport located in Belora. The Multi-modal International Cargo Hub and Airport at Nagpur (MIHAN) is under
development and could further boost the potential of the region as an international cargo hub. The logistics sector
is fragmented due the presence of several players operating in different areas in both organized and unorganized
sector. Key logistics providers in the Vidarbha region include DTDC, Caravel Logistics, Goodrich maritime,
Links cargo, Kintetsu World Express (India) among others.

3. DISTRIBUTION CHANNELS & LOGISTICS INFRASTRUCTURE

Total Freight Transport - Modal mix

0% 7% 0%
32%

60%

Airways
Road
Rail
Inland
waterways
Coastal
Shipping

Transportation infrastructure in India, as mentioned earlier, is mainly classified into roadways, railways, airways
and waterways. Among freight and passenger transportation, freight accounts for nearly 90% of the demand.
Roadways hold a major share of the freight traffic. Figure 3 shows contribution of each of the channels to the
total freight transportation demand. The total freight traffic is estimated at about 2.3 trillion tonne kilometres
(IBEF, 2013). Considering the size of the country and the increasing demand for logistics support, the current
transportation infrastructure is inadequate for providing efficient means to support the logistics sector. The
infrastructure in the western and southern regions of the country is relatively well developed.
Roadways
Though rail and waterways are more economical for long distance movement of bulk goods, roadways is still the
most popular mode of freight transport in India. The Ministry of Road Transport and Highways estimates that the
freight through roadways will reach 1835 BTKMs by 2016-17.
Road Network in India

Class
Expressways
Total National Highways
National Highways (Already 4/6 laned)
National Highways which are being 4 or 6 laned

Length (Km)
Source:2,000
IBEF, 2013
92,851.05
22,900
25,000

Source: Wikipedia - National Highways Authority of India

The road network in India is mainly interconnected through National highways and State highways. Almost 40%
of the total road traffic is through National Highways. The Government has instituted the National Highways
Development Project (NHDP) to improve the standard of the major highways in India. This project includes an
investment of around USD 17 Million and construction of about 49,260 km of roads and highways (Source:
NHAI website). The Government of India has proposed to award around 100 highway projects under the PublicPrivate Partnership (PPP) mode in 2016 (IBEF, 2016). Though there is ongoing development of the road
infrastructure, the existence of outdated vehicle fleet on roads is still a cause of concern.
Nagpur city in the Vidarbha region has the best connectivity through roadways, with three national highways and
major state highways passing through the city. Amravati, Wardha, Akola, Yavatmal, Chandrapur, Bhandara and
Gondia come next in road connectivity. Washim is relatively poorly connected. As per 2014 statistics, the
Vidarbha region has a total road length of 65,664 km (Source: Economic Survey of Maharashtra 2015-16)
Railways
The Indian Railways is one of the largest railway networks in the World, with a total route length of 68,525 kms.
It facilitates transport of around 2.8 million tonnes of freight traffic and 25 million passengers every day
(NTDPC, 2014). The development of dedicated rail freight corridors would lead to growth in freight movement
via railways, and also ease the strain on the road infrastructure while helping multi-modal transport. Container
Corporation of India Ltd (CONCOR) provides multi-modal logistics and containerized freight movement by rail,
with majority of the CONCOR terminals linked by railways.

The Vidarbha region constitutes 32.39% of the total Maharashtra railway network. It is well connected to most
important cities including Mumbai, Pune, Hyderabad, Chennai, Bangalore, etc., Nagpur being the most important
railway junction for both passengers and freight movement.
Airways
There are 125 airports in India, with 11 of them being International airports. Air traffic trends for 2014-2015 in
India are shown below. The passenger traffic has grown by 12.6%, whereas the freight traffic has grown by
10.9% over the previous year. (Source: Airports Authority of India website).
CATEGORY
Passengers (in numbers)
International
Domestic
TOTAL
Freight (in tonnes)
International
Domestic
TOTAL

TRAFFIC
50799320
139329838
190129158
1542536
985021
2527557
(Source: Airports Authority of India website).

In the Vidarbha region, Nagpur International airport stands 13 th in air freight traffic in the country. The region also
has airports at Amravati, Yavatmal and Akola. The Maharashtra Airport Development Company (MADC) is
responsible for development airports at Gadchiroli and Chandrapur as well.
Logistics & Distribution Centres
Nagpur houses several independent storage warehouses. These are developing into full-fledged multi-modal
logistics parks and distribution centres, led by some of the major logistics service providers in the region, like
Safexpress, the Orange City Logistics Park, etc. in addition to an upcoming logistics park at MIHAN.

4. LOGISTICS MARKET SUMMARY

The market size for logistics in India contributes to a business of about
US$ 135 billion as of 2014-15 and expected to grow to US$ 300 billion
by 2020 (Novonous 2015). With an exponential growth in the Indian
Container
Warehousi
Courier
Rail
Economy, the logistics sector is said to grow by a whopping 12.17%
ng
Service
Transport
CAGR. The logistics cost in India is nearly 14.4% of the total GDP of
Freight
Road
Logistics
Forwardin
the country which is much higher as compared to the other countries
Transport
Park
g
with mature logistics market like the US, Japan, Australia, New
Inland
Express
Zealand, etc. Transportation segment, in particular, is observed to
Container
3PL/4PL
Logistics
Depo
contribute the most to the cost by value of Indias GDP and has been
Container
Coastal
Reverse
increasing steadily which can be attributed to the poor quality of
Freight
Shipping
Logistics
Station
infrastructure when compared to countries with well-established
logistics sector.
Air Cargo
Cold Chain
The logistics Industry can be segmented on the basis of the Industry it
serves. The growth for each sector is differentiated and hence
Project
Port
Logistics
individual market capacity building is done to facilitate the needs of the
industries. The segmentation is done according to following industries:
Automotive Industry
With continual increase in the per capita income of the nation, purchasing power of the people is increasing
and because of modernised government policies, demand from this sector is ever increasing not only in India
but internationally and thus ensures promising growth of logistic sector of the country.
Transportatio
n

Storage

Logistics
Services

Pharmaceutical Industry
The industry has a market size of US$ 20 billion in India and is growing at 12% CAGR in domestic markets.
With rapid growth in this sector, it creates a significant demand on the logistics sector adding to its growth.

Retail Industry
The retail industry in India is one of the largest and accounts for 13% of GDP at US$ 200 billion. Opening of
larger number of retail outlets drives demand on logistics sector and increases the factor of growth rate of the
logistics industry

FMCG
It is the most demanding sector as it puts up huge urgent demands and thus engages with many small
enterprises to service its needs. The market stands at US$12.5 billion with 11% CAGR as in FY2015

IT and Electronics
The electronics industry has been on the rise for more than 2 decades and is growing at a fast pace of 14.7%
CAGR. This results in greater demand from logistics sector and thus catalysing the growth for logistics
industry.
KEY PLAYERS
Vidarbha region has been the centre of attraction for logistic companies owing to the location and
accessibility to the almost all the major cities in the country. A number of companies have entered the
logistics market in Vidarbha and below are the profiles for some of the key players in Logistics industry.

DHL
Well established logistics firm headquartered at San Francisco, DHL has presence in nearly 200 countries and
has setup multiple branches across Vidarbha region for express logistics.

AllCargo Logistics Pvt Ltd

Logistics firm headquartered in Mumbai, India was founded in 1993. One of the largest publicly listed Indian
logistics companies, it has a consolidated turnover of about 900 M USD. It comprises of contract logistics
and e-commerce logistics services among others. AllCargo has its presence in Nagpur.

Gati
One of the pioneers in the logistics industry, Gati, was established in 1989 and has its presence across India
and abroad. It provides express distribution, E-commerce, Cold Chain and Logistics solution services. Gati
has a thick network of offices in the Vidarbha region.

CONCOR
Container Corporation of India Ltd, a PSU under the Indian Ministry of Railways was established in 1988
and provides cargo services across India. It has presence in Nagpur since 1997. CONCOR has an Inland
Container Depot at Nagpur which is linked by the railway from all the parts of the country.

Transport Corporation of India (TCI)

TCI is one of the largest private sector logistics company in India, founded in 1958 and has its presence at
Nagpur. TCI provides service like express cargo, conventional transport, Inbound & Outbound Logistics,
Warehousing, Supply Chain solutions, etc. Apart from these companies, Vidarbha region has presence of
numerous other logistics companies like DTDC, First Flight, Agrawal Packers and Movers, AFL Ltd, TVS
Logistics, etc.

5. GOVERNMENT
LOGISTICS

INITIATIVES

AND

REGULATIONS

GOVERNING

The applicable laws governing movement of vehicles and freight across the country are as follows:
1. Laws governing inter-state movement of vehicles:
The Motor Vehicles Act (MVAct), 1988
The Central Motor Vehicles Rules, 1989 (amended in 1994, 2000, and 2002)
Various State Motor Vehicles Acts.

2. Laws governing inter-state movement of goods:

Central Sales Tax Act, 1956
Various State Sales Act/ State VAT
Various Local/Municipal Acts governing Octroi and Entry Tax.
3. Laws governing access control to National Highways:
National Highways Act, 1956
National Highways Rules, 1957
The National Highways Authority of India Act, 1988
National Highways (Land and Traffic) Act, 2002
Highways Administration Rules, 2003.
The various Projects and amendments announced which affects Logistics industry are as follows:

GST
With GST coming into existence, there would be an effective cross state transport and relief from tedious
paper work for road transporters. The taxation would be done at a national level and not state level, and
hence the logistics cost would go down.

Multi-modal International Hub Airport at Nagpur (MIHAN), 2002.

MIHAN is an airport development project. The main objective of this project is to use the full potential of
Nagpur city, centrally located in India with major international aviation routes passing through it. The
project aims at transforming the existing Dr. Babasaheb Ambedkar International Airport into a major cargo
hub with good roadways and railway connectivity.

Setu Bharatam, 4th March 2016

Setu Bharatam was launched by Prime Minister, with an aim to make all national highways free of railway
crossings by 2019. Under this project, around 208 Rail over/under bridges would be constructed at
unmanned railway crossings on national highways.

Pradhan Mantri Gram Sadak Yojana, 25th December 2000

Pradhan Mantri Gram Sadak Yojana was launched by the Government of India to provide all-weather road
connectivity to all the unconnected rural habitats. This will facilitate easy movement to and fro from
interiors which are potential raw material sources and future industry set up areas.

Make in India, 2014

Make in India was launched to transform India into a global design and manufacturing hub. With various
plants and industries being set up in India there would be huge demand for logistic industry.

Motor Vehicles Act (Amendment), 2016

Under this amendment, Entrepreneurs will be allowed to operate passenger buses between various locations
subject to certain safety and efficiency measures.

6. OPPORTUNITIES AND CHALLENGES IN THE LOGISTICS INDUSTRY

OPPORTUNITIES
Use of technology
Use of RFID and tracking technology like GPS and smart tags can help improve security and streamline
processes for more efficient service. Use of IT Management solutions can help quicken decision making and
improve supply chain.

Investment in Integrated logistics solutions

There is opportunity for service providers to enter into complete logistics solutions, providing end to end
services to meet the demands of growing industry, including providing value chain optimization solutions to
their clients.

Opportunity in Railways
Diverting resources to develop railway infrastructure and connectivity can ease the strain on roadways and
provide an alternative and cost effective mode of transportation.

E-commerce industry
The growth in the e-commerce industry provides great opportunity to drive demand in logistics and
warehousing to support it and provide end to end services.

CHALLENGES
Land Acquisition
For building up Logistics infrastructure, logistics industries require huge mass of land. Unavailability of land
for setting up logistics parks and warehouses is one of the leading reasons for sluggish growth of Logistics
industry in the region.

Poor Infrastructure
One of the biggest obstacles logistics companies face in India is poor infrastructure. Poor connectivity
conditions lead to increased vehicles cost and in turn increases operation costs. Lack of integrated
transportation increases the turnaround times.

Lack of IT infrastructure
Application of suitable IT infrastructure to co-ordinate operations can improve efficiency of the process.
However, due to a highly fragmented industry in both organized and unorganized sectors the economy of
scale cant be leveraged, making it expensive to invest in technology and IT infrastructure for small units.

Trained Resources
There is a high requirement of trained personnel to operate the advance technology. Industry must have
trained personnel to handle the advance technology or else with untrained labourers even the best technology
would fail. With no proper training institutes in the nation, there has been a shortfall in skilled management.

Complexity in documentation
Extensive manual documentation required to comply with procedures of different states during inter-state
transport results in huge delays. With no digital systems in place, documentation is prone to manual errors at
different check posts.

Complex Tax laws

There are existing tax regulations present at different levels that are imposed by central and state agencies.
Every state has its own tax structure for the movement of goods, which can make services or goods
uncompetitive in certain geographies.

Distant Sea Port

Vidarbha is surrounded by land from all the sides. Though Vidarbha has one Inland container
Depot at Nagpur, but not having a sea port is a major setback. Also getting export consignments would be
difficult with no sea ports in vicinity.

Absence of Large Industries

The current demand for logistics facilities is low in the Vidarbha region as it is neither a leading industrial
centre nor a major consumer like Mumbai, Chennai, Hyderabad, Bengaluru, etc. As logistics companies
primarily support other industries in region, with absence of large industries in the region, there is a limit to
the growth potential on Logistic sector in the region.

Small and poor warehousing

Because of poor infrastructure, the companies have smaller warehouses. Installation of Enterprise Resource
Planning (ERP) and other technology for small warehouses is costly. Also, poor warehouse storage facilities
lead to huge amount of losses.

Away from Future growth hubs

Despite Vidarbha being centrally located, its distance from the fast developing Delhi Mumbai
Industrial corridor will hamper the growth of Vidarbha as hi-tech logistic hub in the future.

7. OBSERVATIONS
The logistics sector, though huge, is highly distributed among several players, majority of them being in the
unorganised sector. The organised sector constitutes only 2% of the industry. Hence, most service providers are
unable to establish large scale operations and grow their networks, making it unviable to invest in technology or
management solutions to standardise their processes. Merging smaller units that operate at different levels in the
logistics value chain to provide integrated services to end user can help growth in the industry and streamline
operations.
While Vidarbha has the strategic locational advantage, for it to develop as a logistics hub and be competitive in
the industry, several other factors like favourable government policies, infrastructure, large scale industry growth
are essential. Introduction of GST would play an important part in simplifying the tax structure and attracting
investment in the region. Existing projects like MIHAN should be made functional in a timely manner to aid
connectivity to all parts of the country.

8. REFERENCES

Novonous (2015), Logistics Market in India 2015 2020, NOV0515002, May 19, 2015
MSME Development Institute (2015), Industrial Profile of Vidarbha Region 2014-15.
EBTC (2013), Overview of the demand in the Indian transport and logistics industry, 2013
IBEF (2013), Indian Logistics Industry: Gaining Momentum, A report on the performance and emerging
trends in the Indian logistics industry, November 2013
IBEF (2016), Road Infrastructure in India, February 2016
NTDPC (2014), India Transport Report: Moving India to 2032, Vol 1
http://www.pradhanmantriyojana.co.in/: Online portal for Government schemes