Sir, Logistics cost of India is ranked among the highest in the world, covering 14% of the GDP, which not only raises the cost of goods and services but creates negative externality, the costs of which have to be borne by a range of constituencies, including the poor; freight increases in Railways for example raises the cost of essential commodities so keeping passenger fares low to subsidize them with high freight rates do not help the poor at all. No wonder it is cheaper to bring apples from New Zealand to Chennai than moving them from Himachal to Chennai.

Passenger fare in railways in most Asian countries is on an average six times that of India which shows the level of subsidization that has been attempted over decades. While this is the case the level of capacity addition on new lines after independence has been 15000 km compared to 50,000km done by the British.

Sir, the annual budgets are a means of allocating resources, but also is a prime-mover for setting policy or making a change in stance as regards earlier policies. It is time that the next budget looks at the logistics sector as a whole, as it encompasses a number of Ministries, starting from Railways, Road, Civil Aviation, Port and Urban Planning and Development. The inter-ministerial coordination amongst these various departments of the government leaves a lot to be desired.

I would like to propose, in line with the recommendations of the NTDPC (given on Page-17) National Transport Development Policy Committee Report of 2014, a single integrated Transport Ministry, in the decentralized form, which would build a comprehensive regulatory environment to govern all flows.

India is the only country which has five different ministries in logistics that often work at cross purposes to each other. The urban transportation could be moved into the state subject. The National Transport infrastructure finance should be neutral to delivering mobility, sustainability and inclusion goals.

The Railways restructuring program as tabled in the Bibek Debroy Committee report must be fast- tracked and the following areas need immediate attention:

Logistics heavy companies like the Power, Aluminum, Steel and Cement sector, who contribute significantly to the revenues of Railways, and thereby contribute to the social sector, need to be incentivized with a differential tariff for Rail as otherwise many of the movements would shift to road, at the cost of sustainable goals that they are otherwise committed to. This sector is at the cross roads, with a sharp downturn in commodities cycle; it is only timely that such incentives should be introduced as on the health of these sectors, the health of the economy lies.

In line with the Bibek Debroy & the NTDPC Report, we would like to propose a Tariff Regulatory body that rationally reviews the tariffs and sets policy guidelines. It is a matter of great discomfort that the spiraling high cost of transporting goods is making road movements cheaper in many of the sectors over rail. The tariffs need rationalization for movements from West to North and East Vs from East to North and West as cost of reverse logistics plays a significant role for many commodities.

Passenger tariffs are at the very low, while there are many trains that have low capacity utilization. The introduction of smart tools and techniques would enable such disparities to be removed, where a train is going empty but another on the same route is going more than full. Such optimization across the entire network would make the passenger trains recover from making whopping losses and the need for cross-subsidy from the freight tariffs would diminish. It could well be that some of the non-remunerative routes be withdrawn, which would augur well with this approach and the passenger sector cannot account for 25% of the overall revenues, while costs account for 63%.

The three states of Chattisgarh, Jharkhand and Odisha, where the bulk of the new Mines are located, need additional support in terms of connectivity of the Mines to the Power Plants. The existing routes in these three states have line capacity utilization of more than 150%, thus these routes cannot be further choked. Separate Lines, Merry-Go-Round and by-pass routes need to be developed. Private participation in the last mile and first mile would need involvement of the regulatory agencies that allow freight rebates to cover the capital costs as the same infrastructure would be used throughout the life of the mine.

Line capacity augmentation is part of the major capital outlay, but special focus needs to be allocated to the three states where the maximum congestion is slated to happen as the Mines come on-stream. Some of the important lines like the R-V (Raipur-Vijayanagaram) line need a special task force to complete the double-lane which would reduce the delays considerably from East to West & Northward destination.

The DFCs (North-West and North-East) need to be realigned to the logistics movement of import & Export and also the bulk goods. The corridors by themselves would not serve the purpose de-congesting the existing traffic in the clusters.

Benefits in form of tariff rebates for Investments in the Rolling Stock under the LWIS scheme needs to be extended to 30 years as the stock would still be in use and its non-replacement does not bring any additional cost to Railways.

Maintenance programs at the Zonal level causes un-necessary delays for moving the rolling stock over large distances, whereas such programs can be taken up in-house under the aegis of the railway inspection & related directorate at actual costs. This would save railways from loss of revenues as the long distances are covered empty and railways misses the freight.

All permissions must be brought under one window of clearance as it takes almost a year to get permissions, starting from speed certificates to operationalizing a new rake procured under LWIS as multiple agencies are involved in giving clearances from different zonal offices and divisions covering departments: Mechanical, Electrical, RDSO, Commercial, Board, etc.

Road Ministry

Electronic system of tax payment must be implemented as India has become “Smarter”, which would stop all delays around toll stations. GST hopefully would take care of the long queues around the border check points, which alone would cater to 15% of inefficiency of the entire road movement.

Reverse logistics in a country like India is one of the weakest links as for every movement there is no linked movement where better economies could be planned. The country wide traffic movement is unmapped, which is a national loss as areas of demand cannot be efficiently mapped with matching supply. A separate task force needs to be set up to review this vital requirement through GPRS & other tracking systems.


Road tax should also be simplified and state / Central taxes should be merged as one with the payments to be processed through an electronic system.


The coordination between Ports, Road & Railways ministries would ensure that any investment made in Port has the right infrastructural back-up for executing the deliverables originally envisaged in the investment. A Port like Gangavaram, for example, at its peak capacity utilization handle 50 Million tons of cargo, whereas its ability to evacuate this is currently pegged at 25 Million ton as rail infrastructure clubbed with congestion makes it inadequate.

Open Letter to the Finance Minister & Railway Minister of India on key focal points for the Logistics Sector of the Economy
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