The Air Cargo Industry & its specialty – a personal experience

The Air Cargo Industry & its specialty – a personal experience                 by Archie D'Souza

The air cargo industry is quite obviously different from the passenger airline industry. Beyond both offering services that mostly focus on transportation via air the two industries share little else. Let's get into it.

The main focus for a passenger airline is to service passengers.  Cargo is only a bi-product though its revenue earning capacity is sizeable.  Services rendered to passengers are mainly confined to the time s/he is on board.  On the ground, it’s negligible and almost entirely contained within the airport.  Passenger airlines offer airport to airport services for passengers as well as cargo.  Any onward travel and accommodation at the destination is ultimately the passenger’s prerogative.

I started my career with the cargo division of Air India.  Like every passenger airline, it offered an airport-to-airport service.  This meant that an exporter had to get the cargo moved to the airport of departure, get the cargo customs cleared there and hand it over to the airline.  At the airport of destination, once the cargo arrived and was checked, the carrier would send a cargo arrival notice to the consignee, who in turn, either directly or with the help of a customs broker (CHA in India).  Cargo and traffic (dealing with passenger services) were two of the divisions of what is Air India’s Commercial Department.  Both these divisions had their similarities and differences.

Let me look at the similarities first.  Both are important revenue earners for an international airline.  A passenger needs a confirmed seat; cargo needs confirmed space in the cargo hold.  A passenger needs to carry a document called a ticket; cargo is carried by an airline after, among other things, the issuance of an air waybill.  A passenger cannot leave the country without a passport; the shipper requires to file a customs declaration, called a shipping bill in India.  Passengers need to pass through immigration; cargo needs to be customs cleared.  Passengers wait at a passenger terminal prior to boarding; cargo is stored in a cargo terminal.  On disembarkation passengers need to pass through immigration and customs; cargo shipments need to be customs cleared.

While these are the similarities, the differences are far more pronounced.  The facilities required to store and transport goods are far less than those required for waiting passengers on terminals and those travelling on board.  In an aircraft, the passenger needs aisle space, leg, head & elbow room and comfortable seating; cargo on the other hand can be stacked one on top of the other with no space in between.  Cargo doesn’t require refreshments and entertainment as passengers do.  Further, packages do not complain whereas passengers can be very vocal in their complaints.  The list could go on and on.

One of the biggest advantages or air transportation, compared with other modes, is the fact that there is hardly any limit to the number of places where airports – nodes for air transport – can be set up.  Due to this air routes are practically unlimited.  Thanks to greater movements of passengers and freight the density of air routes over the North Atlantic, inside North America and Europe and over the North Pacific is definitely greater.  Constraints with regard to air transportation are multidimensional.  Let’s take some examples.  A commercial plane needs about 3,300 meters of runway for landing and takeoff.  In addition, several other facilities need to be set up at airports.  Therefore, the site chosen must take these into consideration.  Also, airports cannot, for obvious reasons, be set up in densely populated places.  Climate, fog and aerial currents are other constraints that need to be taken into consideration with regard to air transportation. 

Air activities are linked to the tertiary and quaternary sectors.  What exactly does this mean?  The World economy and that of any nation is divided into various sectors – primary, secondary, tertiary, and quaternary.  These terms are used to define the proportion of the population engaged in particular activities.  Let us briefly look at each of these. 

Extracts and harvests - viz. what is mined or farmed is what the primary sector of the economy deals with; in other words, products from the earth.  It includes the production of raw material and basic foods.  Activities associated with it include agriculture (both subsistence and commercial), mining, forestry, farming, grazing, hunting and gathering, fishing, and quarrying.  The packaging and processing of the raw material associated with this sector is also considered to be part of this sector.  In developed and developing countries, a relatively low proportion of workers are involved in the primary sector; the figure in the US is 3%.  That is the percentage of the labour force engaged in primary sector activity today.  In the mid-nineteenth century, it was more than two-thirds. 

The secondary sector of the economy deals with, among other things, the manufacture of finished goods.  This includes all of manufacturing, processing, and construction.  Thus, activities associated with it include metal working & smelting, automobile production, textile production, chemical & engineering industries, aerospace manufacturing, energy utilities, engineering, breweries and bottlers, construction, and shipbuilding.  The tertiary sector of the economy is nothing but all the service industries, providing services to individuals and business & other organisations.  Retail & wholesale trade, transportation & distribution, entertainment (movies, television, radio, music, theatre, etc.), restaurants, clerical services, media, tourism, insurance, banking, healthcare, and law are some of the activities associated with this sector.  In most developed and developing countries, a sizeable proportion of workers are devoted to this sector – more than 80% in the USA.  Finally, the quaternary sector of the economy consists of intellectual activities. Activities associated with this sector include government, culture, libraries, scientific research, education, and information technology.

Principal among the tertiary and quaternary sector activities that the airline industry is dependent upon are finance and tourism.  However, if one looks at air cargo in particular, it is the secondary sector that it mainly services.  However, air cargo brings in a lot of ancillary and support services which are part of the tertiary and quaternary sectors.  Passenger services benefit from finance and tourism as they lean a great deal on the long distance mobility of people.  However, cargo services provide the distance mobility of goods.  Since the introduction of the Boeing 747 and other wide-bodied aircraft air transportation services have been accommodating growing quantities of freight.  Airlines are today playing a huge and fast-growing role in global logistics, most often with the help of global service providers.

Air cargo, in many ways, is a unique service.  There are many segments involved in it.  Among those we can list out are airport-to-airport, door-to-door, door-to-airport and airport-to-door.  Most of the World’s carriers (airlines) offer an airport-to-airport service.  The shipper (exporter) needs to hand cargo over to the carrier ready for carriage at the airport of origin.  This means, among other things, cargo has to be customs cleared.  The carrier, either on its own or using the services of other airlines, ensures that the cargo reaches the airport of destination.  The consignee is informed by the carrier about the arrival of the cargo.  Physical delivery of the cargo only will happen after customs clearance.  We have seen here that customs clearance takes at two points – the airports of origin and destination, the former prior to carriage and the latter prior to final delivery.  This service is not usually provided for by the carrier and the exporter/importer may not have the necessary expertise to carry it out.  So, they appoint customs brokers to do this job.  So, we see here an additional service provider.  I shall, in a future blog, talk about the role of intermediaries.

There exists a kind of carrier called an integrator who offers door-to-door, airport-to-door and door-to-airport services.  They also offer airport-to-airport services.  What distinguishes an integrator from the others is that they have their own fleet of aircraft and offer services which go beyond airport-to-airport.  Passenger airlines mainly focus on carrying people.  Air cargo is a bi-product albeit one that earns a huge amount of revenue.  They carry cargo in bellies of the aircraft.  They may also own a fleet of combi & freighter aircraft.  These terms will be defined in another blog.  Cargo airlines have fleets of only freighters, no passenger aircraft.  All integrators are cargo airlines.

Another type of service provider exists, the express-cargo or courier company.  These companies offer door-to-door plus the other services.  In other words, their representative will come to the exporter’s premises to pick the cargo up.  The cargo will be customs cleared by a customs broker called a custom-house agent (CHA) in India.  There are other service providers like IATA agents, freight forwarders, etc.  These service providers will be dealt with in a later blog.  Here, we have confined our focus on the role of carriers.  These will include passenger and cargo airlines, including integrators.

Aircraft & theirs uses

Aircraft and their Uses

- Archie D’Souza

[This constitutes an extract of a book I'm writing]

Do check this link [http://www.atlantisquest.com/Samar.html] 

The aeroplane is the fastest means of transport, whether of passengers or cargo.  Only spacecraft travel faster than aeroplanes.  We shall be looking at the exiting world of air transportation with an emphasis on carriage of cargo.  From the tiny bi-planes, which carry one or two passengers, to the gigantic jumbo jets and transportation aircraft which can carry huge machinery and battle tanks, air transportation has transformed the way humans think and live.  We shall be tracing the development of aircraft and looking at aeroplanes in use today and most important how freight is carried in them.  We shall also look at advantages and limitations of airfreight as a mode of goods transportation.

1.    History and Development

From the time mankind evolved on planet Earth, people have dreamed of flying.  Ancient Indian texts, like the Ramayana and Mahabharata and Greek one too had their legends about flying people and objects.  Kites were perhaps the first heavier than air objects which flew.  In 200 BC the Greek mathematician Archimedes discovered the principal of floatation.  This was used in the making of balloons.  Kites were possible the predecessors of gliders.  Balloons and gliders are not powered and therefore cannot be controlled.

Airships were the first powered objects to fly.  An airship is a lighter-than–air aircraft.  Its huge body contains a light gas like helium.  Like a balloon, the gas lifts the airship so it floats in the air.  However airships, unlike balloons, have engines that move them and can be steered in the required direction.  Balloons move wherever the wind takes them.  Airships also differ from aeroplanes and helicopters which are heavier-than-air and use their engines to lift them from the ground.

Although it was the Wright brothers who invented the aeroplane as we know it today, the idea of a modern flying machine was first conceived in 1500 by Leonardo de Vinci, an Italian painter.  He made a drawing of a flying machine with wings which would flap like a bird.  Between 1800 and 1903, several people tried to experiment with flying machines but were all unsuccessful.  It was only on December 17, 1903 that the Wright brothers flew their first aeroplane successfully.  The flight took place near Kitty Hawk in California.

The Wright brothers demonstrated that it was possible that it was possible to fly a manual machine that was heavier-than-air.  But, in 1895, eight years earlier, a Sanskrit scholar from the princely state of Baroda had designed a basic aircraft called Maruthsakthi, meaning air power. The scholar by the name of Shivkar Bapuji Talpade based his design on texts in the Vedas.  His unmanned aircraft took off in 1895 before a large gathering at the Chowpati beach in Bombay, now Mumbai.  While the Wright brother flew a manned flight, Talpade’s was unmanned.  However, while the flight piloted by Orville Wright crashed after covering a distance of 120 feet, Talpade’s unmanned flight reached a height of 1500 feet and covered a much larger distance.  A British historian, Evan Koshtka has described Talpade as the first creator of an aircraft.

The entire World has rightly recognised the achievements of the Wright brothers and celebrated its centenary on December 17, 2003.  However, Talpade whose invention was reported by the newspapers of his day was never accorded his rightful place in history.  India, it must be remembered, was ruled by the British, who were definitely not happy with his invention and made sure he got no help whatsoever to develop it.

Talpade was born in 1864 in the locality of Chira Bazar in Dukkarwadi which today, is an extremely congested part of Mumbai.  What is most fascinating about his design is that it was based entirely on material available in the ancient Indian Vedas.  A great Indian sage by the name of Maharishi Bharadwaja had in ancient times written a text called the Vaimanika Sastra (Aeronautical Science).  According to Western Indologist Stephen Knapp, the Vaimanika Sastra describes in detail a design similar to the one being developed by NASA today.  The design, in what is called the Mercury Vortex Engine, is the forerunner of the ion engines that NASA has developed.  According to Knapp additional information on the same can be found in another ancient Vedic text called Samaranga Surtradhara.  He says the text devotes 230 verses on how to use these machines in war and peace.

Another Indologist by the name of William Clarendon has translated the Samaranga Surtradhara.  In his translation is a detailed description of the Mercury Vortex Engine.  The following is a quotation from the same: “Inside the circular airframe, place the mercury engine with its solar mercury boiler at the aircraft centre.  By means of the power latent in the heated mercury, which sets the driving whirlwind in motion, a man, sitting inside, may travel a great distance in a most marvellous manner.  Four strong mercury containers must be built into the interior structure.  When these have been heated through solar or other sources the vimana (aircraft) develops thunder power through the mercury.”  Over a century and a decade ago Talpade was able to use his knowledge of the Vaimanika Sastra to produce sufficient thrust to life his aircraft 1500 feet into the air.

A great deal has been written on the subject in various Vedic texts.  An even greater deal has been lost to posterity.  Talpade’s invention finds mention in newspapers of the day.  Our imperial rulers made sure that it never took off.  He died un-honoured in 1916.  Greek mythology did make a mention of humans flying but ancient Indian texts give practical and workable methods on flying machines.  The Wright brothers rightly deserve their place in history.  No one should deny them that.  However, Talpade also deserves his rightful place and we should give it to him.  Remember, it was he who utilised the ancient knowledge of Sanskrit texts, to fly an aircraft, eight years before the Wright brothers.

Between 1903, when the Wright brother flew the first aeroplane and the First World War planes were mainly used for races and circuses.  The World War brought in the first military aircraft.  The World's first commercial flights were operated by World War I vintage bombers.

Between the 1920s and 30s, aeroplanes started increasing in size, speed and capacity.  Advanced navigational devices and pressurised cabins helped develop aircraft even further.  These planes like the Douglas DC 3 were propeller-driven.  The first passenger jet airliner was the Comet, a British plane which was put into service in 1952.  In 1955, the French built the twin-engine Caravel and the Soviets built the TU 104.  All these were small in size and had limited cargo capacity.

In 1958, Boeing, the company based in the US West Coast city of Seattle built a four-engine plane called the Boeing 707.  This was not only large in size but also could cross the Atlantic without refuelling.  In 1960, the US Company McDonnell Douglas put the DC 8 into service.  The Boeing 707 and DC 8 had huge capacities in their bellies, more than their predecessors.  Thus was born airfreight as a major commercial earner for airlines.

Till 1970, the Boeing 707 was the largest commercial aircraft.  However, compared to today's aircraft, capacities were still limited.  The introduction of the Boeing 747, the first jumbo jet, changed the way cargo was carried.  Compared to a passenger capacity of 150 in the 707, the 747 could carry up to 500 passengers.  With bigger bellies, the capacity to carry cargo increased from 6 to 8 tonnes to 16 to 20 tonnes.   Till the 1970s, aircraft manufacture was dominated by the Americans.  In the 70s the European consortium Airbus was formed and came out with the A 300 series of aircraft.  Today, Airbus and Boeing, between them control 90% of the aircraft industry.

The Air Cargo Industry & its speciality – a personal experience III

The Air Cargo Industry & its speciality – a personal experience III 

Archie D’Souza

People at large and very often air cargo users and service providers do not have the slightest clue about how cargo is carried in an aircraft.  An incident comes to my mind when I was in the airline industry.  I was loading cargo on a pallet when an agent’s representative walked up to me and remarked, “I’ve cleared my consignment before this one was, why aren’t you loading my cargo first?”  I told him, “I’m loading this cargo for a flight to Frankfurt leaving in a couple of hours.  Your cargo is destined to Singapore and that flight is only tomorrow.”  Yes an IATA agency employee not knowing that Frankfurt and Singapore are in different directions.  It reminded me of a little quote from James Michener – “The more I work in the social-studies field the more convinced I become that Geography is the foundation of all. When I call it the queenly science, I do not visualize a bright-eyed young woman recently a princess but rather an elderly, somewhat beat-up dowager, knowing in the way of power.”   

There was another occasion when something similar happened.  Only this time the two consignments, albeit for different destinations, were booked on the same flight.  I was building a pallet for New York on a BOM-LON-NYC flight and the agent whose cargo was destined to London protested that he’d cleared his cargo first but I was loading the New York cargo before his.  How dare I commit such a sacrilege?

Airline staff too are no exception.  I was once taking a flight to Bangkok.  At the airport I asked the representative of the concerned airline the aircraft being use for the flight.  The answer I got was “Airbus 737.”

I started my career in Mumbai and later moved to Bangalore when it had no international flights and a tiny customs cargo warehouse.  All international cargo, incoming and outgoing, used to be carried on Indian Airlines flights from or to Mumbai or Chennai (Bombay & Madras then).  Often, agents, without checking with the issuing carrier, would cut an air waybill and cargo would be handed over direct to Indian Airlines without prior booking.  The results were often disastrous.  I set up a system to remedy that where cargo couldn’t be customs cleared in Bangalore unless space was confirmed out of Mumbai or Chennai.  This system continued till Bangalore became an international airport.

Air India started operating a freighter flight from Mumbai to Bangalore & back in 1989.  This was with an IL 76 aircraft, carrying 7 pallets.  The task of handling this freighter was given to a senior colleague of mine who had never stepped into the Bombay Airport’s cargo complex.  The work-culture in the company didn’t permit a junior to give a suggestion to a senior.  Ideas from juniors were scoffed at.  The senior handling the flight would load cargo on pallets on a “first-come-first-served” basis.  The result was that every pallet had cargo for more than one destination.  This resulted in delays at Mumbai.  The gentleman was on leave for a month and I was asked to handle this flight.

As I said, the IL 76 carried 7 pallets, of which six could go into a 747-Combi (see my blog on aircraft configuration to know more).  We had combi flights operating out of Mumbai destined to Toronto, Frankfurt and Tokyo.  I’d book cargo on flights connecting three to four hours after our flight landed in Mumbai.  Six of the seven pallets would connect almost immediately out of Mumbai.  Cargo on the seventh pallet would connect the following day as the load on it was invariable for more than one destination.  A little bit of imagination and knowledge of working which helped customers get far better service.  Unfortunately the culture of the carrier I worked for didn’t reward efficiency and performance and I was given an offer I could refuse by the Jet Air Group.

For the benefit of lay readers, cargo is loaded in bellies of passenger aircraft.  Passenger seats are on the main deck.  There also exist aircraft with no passenger seats at all.  The floors are modified to accommodate cargo.  Such aircraft are called freighters.  Combis are aircraft which carry both cargo and passengers on the main deck.  Almost every airline has a cargo division; some like Lufthansa have a separate fully owned subsidiary for cargo services.  There also exist all-cargo airlines like Cargolux and Flying Tigers.  Integrators (please see my previous blog) are all-cargo airlines.

I shall speak a little more about all-cargo carriers in my next blog.

The Air Cargo Industry & its specialty – a personal experience II Archie D’Souza

The Air Cargo Industry & its specialty – a personal experience II Archie D’Souza [This is a second article as part of a series of articles on the same subject] I have already mentioned that the cargo industry offers various types of services that are diverse and unique. One such service is offered by integrators, viz. carriers offering door-to-door services. Examples of integrators are TNT, UPS, Fedex, DHL, Blue Dart, etc. Integrators and courier or express cargo companies compete with each other for the same market. In fact, the former are courier companies with a fleet of aircraft. The non-integrators use the services of scheduled passenger and cargo airlines to carry their loads. A company representative, could be a direct employee or one working for a franchisee/agent, will pick up package/s from the origin customers’ (shipper/exporter) premises (home/office/factory/warehouse, etc.). These packages then are moved through one or more hubs to an airport at the origin country. They are then carried in aircraft to destination airports. Once there, exactly the reverse of what happened at the origin takes place. The package/s is/are delivered to the destination customers’ (consignee/importer) premises. Users of this service needn’t drive to and from an airport or appoint customs brokers. This service is very popular for documents, samples and other very small consignments. The core business of courier companies, whether integrators or not, is handling small consignments (a consignment is a lot of packages moving under a single consignment note for one shipper and consignee). For larger consignments they are not cost-effective for the users. In such cases, depending on the type of service required and the contract between buyer and seller, other types of services may be used. The exporters and importers would use the services of passenger or cargo airlines who offer an airport to airport service. The carrier (airline) will only accept cargo after it is ready for carriage. This means that the following must be done: 1. Cargo should be properly packed, marked and labelled 2. Documentation needed by the airline, like the air waybill, completed 3. Cargo customs cleared These formalities have to be completed by the exporter or his agent prior to acceptance by the carrier. The exporter may do so himself or use the services of a customs broker. At times the buyer may decide to perform the services and ask the seller to hand over the cargo and documents to their nominated forwarder. The terms of trade or INCOTERMS (short for International Commercial Terms) decide who will be responsible for performing these services. Standard INCOTERMS are published periodically by the International Chamber of Commerce. The INCOTERM used for an individual consignment decides the following: • Which tasks will be performed by the exporter • Which tasks will be performed by the importer • Which activities will be paid for by the exporter • Which activities will be paid for by the importer The tasks/activities mentioned here are the following: • Packing for export • Pick-up and local transport at the origin • Customs clearance for export • International carriage • Insurance • Customs clearance for imports • Payment of customs import duties • Delivery and local transport at destination It’s very clear that some of these tasks are undertaken at the origin and some at the destination. Purchase of insurance can take place at either place. We shall be taking a detailed look at INCOTERMS and their usage in another article. Right now let us look at what is involved in making cargo ready for carriage. These functions are generally carried out by a freight forwarder or a cargo agent. They are intermediaries between shippers and consignees on the one hand and carriers on the other. Legally they act on behalf of both the shipper and carrier. An IATA cargo agent is a freight forwarder registered by IATA to act on behalf of IATA member airlines. The task of customs clearance is completed by a customs broker (CHA in India) – an individual or organisation licensed by customs to customs clear goods for imports or exports on behalf of consignees or shippers. In most instances freight forwarders also have a customs broking license, so the exporters/importers are dealing with the same party. We shall be looking here at when cargo becomes ready for carriage and the role of the freight forwarder/customs broker in doing so. From now on we shall only be using the term forwarder. Some of the services provided by forwarders to exporters are: • Providing facilities for acceptance or collection of export shipments • Arranging pick-up from exporters’ premises • Preparing documents pertaining to customs clearance and transportation • Arranging insurance • Booking space with carriers and liaising with them in connection with the movement of goods • Customs clearance and delivery at destination • Delivery status to the shipper Exports involve procedures which, more often than not, an exporter may not be conversant with or due to logistical problems may not be able to complete the formalities himself. The main role of the freight forwarder is to ensure that these are completed in a way that will benefit the exporter to the fullest extent. The forwarding agency staff must be in a position to understand and explain the complex legal and documentary requirements involved in international carriage. How does all this happen? This is exactly what we are going to see. An exporter will call on the agent telling that a consignment is to be dispatched. The agency staff receiving the call will require the following information: • Mode of transport to be used (as our discussion is on airfreight we assume that air is the mode) • Booking details (will be dealt with when we deal with Booking Procedures) The following steps are involved in the shipment of goods: 1. The agency must receive from the shipper such documents as invoice, packing-list, GR, etc. (Documentation is an altogether separate discussion). Based on the booking details the forwarder will reserve space with the carrier 2. The agency staff prepares the necessary customs documents and clears the cargo 3. The cargo is handed over to the carrier ready for carriage The agency staff should be able to suitably advise the exporter on the choice of carrier. We have seen earlier that the exporter calls the forwarder to give details of the consignment. The shipper needs to provide what is called instructions for carriage. These instructions may be either oral or in writing. In case of oral instructions, the agency staff should preferably ask the shipper’s representative to sign the air waybill. It is, as far as possible, advisable to get the shipper’s instructions in writing. This can be done on the shipper’s letterhead or preferably in a formatted Shipper’s Letter of Instructions (SLI). These forms are available with local or international forwarders’ associations. The main advantages of an SLI are that it is itemised in such a way that all possible aspects are given consideration. Further, legally by signing the SLI, the shipper does the following: • Authorises the forwarder to prepare and sign the air waybill (AWB) on his behalf. • Acknowledges the acceptance of the conditions of carriage • Certifies the correctness of the consignment containing dangerous goods is in proper condition for carriage by air according to the applicable Dangerous Goods Regulations. It is very important from an agent’s point of view to get the shipper into the habit of using this method of conveying instructions. However, in order to fulfil its purpose the SLI must be accurate and complete. Cargo ready for carriage means that the conditions in which a shipment must be delivered by an IATA Cargo Agent to an IATA carrier. The shipment and accompanying documents must be ready for immediate carriage. To do so, the following requirements must be met: 1. The Air Waybill The AWB must be complete and accurate in all respects. It must be issued in accordance to the IATA Air Waybill Handbook, a publication every IATA Agent must have. To be complete and accurate, the person authorised to sign the AWB must ensure correct filling up of all boxes and also ensure checking the weights, measurements and nature of goods The AWB is a contract between the shipper and carrier and hence must be signed twice – once on behalf of the shipper and once on behalf of the issuing carrier. One must remember that the agent is authorised to act on behalf of both the carrier as well as the shipper so may insert his signature twice on the AWB 2. Documentation All documents necessary for each consignment for: • determining the nature of the goods, where required; and • export, import or transit, which the carrier is required to present to customs or any government body must accompany the AWB 3. Marking of packages All packages of each consignment must be marked to help the airline identify them. Either all packages must show the name and address of the consignee as on the AWB, or this information is shown on one or more packages with an appropriate cross-reference on all other packages in the consignment. The exporter/manufacturer’s marks and numbers, as on the AWB, must be clearly visible on the packages in the consignment The International Cargo Handling Coordination Association has made certain recommendations in this regard. I can, on request, provide you with these. Those interested please email me at archiedsouza@samsacademyonline.com. 4. Packing The contents of each consignment must be properly packed to withstand the normal wear and tear of transportation. Goods must be packed in such a way that they will not deteriorate or damage other goods before delivery at destination. Exporters should never compromise on the quality of packing materials to reduce costs. 5. Labelling of packages The forwarder must ensure that adequate stock of airline stickers is available at every branch/location. If a house air waybill (HAWB) is used, then the HAWB sticker must be displayed next to the airline sticker showing the master air waybill (MAWB) number Certain special types of cargo, such as dangerous good, perishables, human remains, etc. have special packing, documentation, marking and labelling requirements. Every IATA agency location must have a copy of the IATA Agents’ Handbook, IATA Live Animal Regulations and IATA Dangerous Goods Regulations (all current editions only) [To be concluded]

The Indian Railways by Archie D’Souza. Its impact on the Economy, in general and the Logistics Industry in particular

The Indian Railways                 -Archie D’Souza

Its impact on the Economy, in general and the Logistics Industry in particular

[While I have referred to the current budget, I am not getting into the politics of the Railway Budget, just confining my comments to economic & commercial decisions]

The Indian Railways (IR) is State-owned and operated by the Ministry of Railways.  Unlike other government undertakings, IR is not a corporation or public sector company.  It is a department of the Union Government.  Its finances are separated from the general budget.  The Railway Minister every year presents a separate Railway Budget.  Here, its annual requirement for funds is voted upon.  The Ministry of Railways is headed by the minister of railways and its policy is formulated and managed by the Indian Railways Board which comprising a chairman and six functional members.  It has wide powers.  The Indian Railways owns and operates one of the largest rail networks in the World.  This spreads over 63,140 route-km.  Its traffic includes over 500 billion passenger-km and 400 billion tonne-km of freight.  However, between 1970–1971 and the late 1990s, the share of railways in the freight traffic market dropped from 65.5% to around 48.0% and its share in passenger traffic, from 32.9% to 23.0%.  However, the Indian Railway’s freight and passenger revenues are increasing as traffic flows of both rail and road networks grow.  This is all thanks to India’s robust economic growth.  The growth in traffic could be attributed to both demand-side and supply-side factors.

As stated, every year, in the month of February, sometimes in March, the Union Minister of Railways presents the railway budget.  This was presented to Parliament on Mar 14, 2012.  Here are some of the highlights of the railway budget.  The following proposals were made by Mr. Dinesh Trivedi:

•  Passenger fares to be hiked by 2 P per km for suburban and ordinary second class travel; 3 P per km for mail/ express second class; 5 P per km for sleeper class; 10 P per km for AC chair car/AC 3-tier and First Class; 15 P per km for AC 2-tier and 30 P per km for AC 1-tier.
• Minimum fare and platform tickets to cost Rs 5.
• 75 new Express trains to be introduced, along with 21 new passenger services, nine DEMU services and 8 MEMU services trains.
• Route of 39 trains to be extended and frequency of 23 trains to be increased.
• Railways to hire more than one lakh employees in 2012-13; 80,000 persons hired last year.
• Indian Railways Stations Development Corp to be set up to re-develop stations and maintain them like airports.
• To set up an independent Railway Safety Authority as a statutory body.
• The open discharge toilets on trains to be replaced with green (bio) toilets.
• All unmanned level crossings to be abolished in next five years to target zero deaths due to rail accidents.
• To provide rail connectivity to neighbouring countries, a new line from Agartala to Akura in Bangladesh to be set up.
• Double-decker container trains to be introduced.
• Steps to improve cleanliness and hygiene on trains and stations within six months. A special housekeeping body to be set up to take care of both stations and trains.
• New passenger services include escalators at major stations, alternative train accommodation for wait-listed passengers, laundry services, AC lounges, coin/currency operated ticket vending machines.
• Two new members, one for marketing, and other for safety, to be inducted into Railway Board.
• On board passenger displays indicating next halt station and expected arrival time to be introduced.
• Introduction of regional cuisine; Book-a-meal scheme to provide meals through SMS or email.
• Specially designed coaches for differently-abled persons to be provided in each Mail/Express trains.
• Railway Tariff Regulatory Authority to be considered.
• National High Speed Rail Authority to be set up; Pre-feasibility studies on six high speed corridors completed; study on Delhi-Jaipur-Ajmer-Jodhpur to be taken up in 2012-13.
• Wellness programme for railway staff at work places.
• Institution of ‘Rail Khel Ratna’ Award for 10 rail sportspersons every year.
• A wagon factory at Sitapali, Odisha, rail coach factory at Palakkad, two additional new coach manufacturing units in Kutch (Gujarat) and Kolar (Karnataka); component factory at Shyamnagar (West Bengal); new coaching terminal at Naihati, the birth place of Bankim Chandra Chattopadhyay.
• Freight loading of 1,025 MT targeted; 55 MT more than 2011—12; Passenger growth targeted at 5.4 per cent.
• Passenger earnings to increase to Rs 36,200 crore.
• Gross rail traffic targeted to increase by Rs 28,635 crore to Rs 1,32,552 crore in 2012—13.

Having seen the general highlights let us see the ones that are directly or indirectly related to freight and logistics:

• To provide rail connectivity to neighbouring countries, a new line from Agartala to Akura in Bangladesh to be set up.
• Double-decker container trains to be introduced.
• National High Speed Rail Authority to be set up; Pre-feasibility studies on six high speed corridors completed; study on Delhi-Jaipur-Ajmer-Jodhpur to be taken up in 2012-13.
• A wagon factory at Sitapali, Odisha, rail coach factory at Palakkad, two additional new coach manufacturing units in Kutch (Gujarat) and Kolar (Karnataka); component factory at Shyamnagar (West Bengal); new coaching terminal at Naihati, the birth place of Bankim Chandra Chattopadhyay.
• Freight loading of 1,025 MT targeted; 55 MT more than 2011—12; Passenger growth targeted at 5.4 per cent.

If freight figures achieve targets, and there are no signs to indicate they won’t, the tonnage will exceed a billion tonnes for the first time.  Having seen these, let us look at an overview of the current status of IR with reference to logistics & freight movements.

The Indian Railways Freight Services are the most profitable among all the services that IR provides.  It covers the entire network of Indian Railways. A wide range of goods is carried by the IR throughout its vast network.  These range from parcel traffic & small consignments to a rake-load-full of coal, iron ore and other bulk commodities.  Commodities carried by rail in India include, raw materials, agricultural products, petroleum products, garments, other finished goods and many more.  One the one hand, the Indian Railways Freight Services is quite economical, and on the other, the IR can carry very large quantities at a time.  Therefore, the Indian Railways Freight Services are able to generate a huge amount of revenue and play a major role in the development of railway network in the country. In fact, it is the surplus from freight services that makes up for the loss incurred on passenger services.

A Wagon, unlike a coach, is a rail bogie, used to carry goods.  A Rake is a group of passenger coaches or cargo wagons coupled together into a single unit pulled generally by one engine.  We are confining our discussion to cargo which is carried in freight trains and parcel vans of passenger trains.  Almost all trains have one attached to it.  The IR transports a wide range of goods within the country in these trains.  There also exist different types of wagons and rakes.  A few examples of these are refrigerated wagons, box vans, etc.

The Indian Railways has planned to construct dedicated freight corridors and mega multimodal logistics parks (MMPLs) or hubs along them.  These terminals will provide state-of-the-art integrated logistic facilities with mechanised handling and intelligent inventory management.  Located at select strategic locations they will serve the objective of reducing the overall logistics cost in the supply chain.  Users will thus get dedicated cost effective services that will cater to their time-sensitive freight transportation requirements.  A multi-modal logistics park (MLP) may be defined as a rail-based inter-modal traffic-handling facility complex comprising container terminals, bulk / break-bulk cargo terminals, warehouses, banking facilities, office space, etc.  Available here will be facilities for mechanised handling, inter-modal transfers, sorting / grading, cold chain, aggregation / disaggregation, etc, to handle freight.

The dedicated freight corridors are being built on a Public Private Partnership (PPP) model, with industrial townships coming up all along them.  Most of them will be declared as Special Economic Zones (SEZ) where the investors will get special tax benefits and be immune to India’s stringent labour laws.  Generally, the MLPs will be developed by the project authorities in charge of SEZs/industrial townships.  A report released in 2009 by Cushman & Wakefield, the Chicago-based global real-estate experts says that the annual growth of the Indian Logistics Industry is expected to be between 15 & 20 per cent.  At this rate revenues are expected to touch a figure of approximately $385 billion by 2015.  Industry analysts say that many logistics companies are in various stages of setting up warehouses, container freight stations, inland container depots, logistics parks, distribution centres and other facilities to tap the trade opportunities.  DHL Logistics, Transport Corporation of India, Gati, Adani Logistics, Sical Logistics, World Windows Infrastructure and Logistics and Mahindra Logistics are some of these companies.

One of the prime objectives of the policy is to enhance the presence of rail transport in the overall transport chain and in so doing reduce logistics costs for the users.  How would this be achieved?  Some of the methods adopted would be through:

·          Minimisation of multiple handling

·          Provisions of various logistics related services close to a rail transport hub

·          Better integration with logistics and supply chains.

To develop these MMPLs through Public Private Partnership (PPP), the ministry of railways had invited expression of interests (EOI).  Companies expressing interest need to provide seeking essential information regarding:

·          Proposed locations

·          Land area required

·          Type/segment of logistics business to be development etc.

These expressers of intent are large logistics service providers, real estate developers, third party logistics players, warehousing investors, container operators, financial institutions, industrial houses, etc. who are willing to participate in the development of these MMLPs.

The Dedicated Freight Corridors (DFC) under the aegis of the Dedicated Freight Corridor Corporation of India (DFCCIL) will be a flagship project of the Indian Railways.  The DFCCIL is a Special Purpose Vehicle (SPV) set up under the administrative control of Ministry of Railways to undertake planning & development, mobilization of financial resources and construction, maintenance and operation of these DFCs.  DFCCIL was incorporated in October 2006 under Indian Companies Act 1956.  The plan to construct dedicated freight corridors across the country marks a strategic inflexion point in the history of Indian Railways that has essentially run mixed traffic across its network. Once completed, the dedicated freight corridors will enable Indian Railways to improve its customer orientation and meet market needs more effectively. Creation of rail infrastructure on such a scale - unprecedented in independent India – is also expected to drive the establishment of industrial corridors and logistic parks along its alignment.

The DFCs entail construction of approximately 3300 km of mostly double, electrified, high axle load track.  A liberal space envelope, fit for high capacity wagons and heavy haul freight trains at cruising speeds of 75 km/hr and top speeds of 110 km / hr, will be provided.  Here are a couple of the routes for the DFCs:

• JNPT/Mumbai – Tughlakabad (Western Route)
• Kolkota – Ludhiana (Eastern Route)

A large number of industrial nodes are also being planned along the Western Route.  These are all part of a related initiative by the Government of India.

Transportation and Logistics Management – Archie D’Souza

Transportation and Logistics Management – Archie D’Souza

(This article appeared in the Kochi edition of The Hindu on FEB 10, 2011)

India, the fourth largest and the second fastest growing economy in the world, is on the fast track where infrastructure spending is concerned. Some of the infrastructure areas where huge government spending is taking place are, roads, ports – major & minor, airports – expansion and modernisation of existing ones and building of new ones, inland waterways, coastal shipping and railway lines. There is also huge spending by the corporate sector both as PPP and private enterprises.

All this means huge career opportunities for fresh graduates and professionals. The movement of goods within and across regions and from one region to another plays an important role in economic growth. Roads, railways, air and shipping lines play a great role in this activity. Airlines, Shipping Lines, Railway Companies, Truckers and a host of allied services need professionals on a regular basis. These are sectors that hire high volume of people with improved and better pay options and transactions run into billions of dollars.

Transportation plays a very significant role in development. The transportation industry is the lifeblood of a nation's economy. In today's globalised situation it becomes the lifeblood of the world economy. How developed is a nation or a part of the World, or for that matter a region within a nation, state or even city, is directly correlated to its transport infrastructure.

When we talk about transport facilities we are not restricting ourselves to the physical infrastructure, which is very important. Also playing a great role is policy. A significant part of a quality course in Transportation and Logistics Management will be devoted to policies formulated and legislations involved in the transportation of goods. Free movement of goods leads to growth and development and thus a better standard of life for the people living in a given region. Procedural delays still exist in India, especially in movement and clearance of goods.

This is one lament of foreigners doing business in India. It is often easier to move goods by road from Rome to Amsterdam, crossing three international borders, than to move them from Hosur to Bangalore – a distance of 30 kilometres.

If transportation is the lifeblood of the world economy, logistics is the lifeblood of the corporate world. It is a very integral and important part of the supply chain. Technology, in today's global village, is available to anyone willing to pay for it. Quality products are taken for granted by every buyer and every supplier knows he needs to deliver. What makes one supplier different from another, today, is logistics. What exactly is logistics? It is all about movement of goods from supplier to manufacturer and from manufacturer to the consumer.

Every manufacturing enterprise as well as organisations in the services sector requires logistics professionals. The role of a logistics professional starts even before an organisation's operations start. Setting up a unit requires machinery and materials to be moved to the site. This may come from different parts of the world. Procuring, transporting and storing are all a part of the logistics department of a company. Once operations start, raw materials and components need to reach the factory site. These may need to be stored and later moved to the manufacturing areas. Finished goods need to reach consumers when they need them.

The commissioning of the ICTT will mean that containers that were previously transiting Colombo, Dubai, Singapore and Port Klang in feeder vessels will now be able to move on direct voyages in mother vessels. This will lead to all the major shipping lines bringing their mother vessels here for the purpose. Employment opportunities will be available directly with these shipping lines or with their appointed agents.

Shipping will bring with it other ancillary and support activities. Large scale warehousing, bonded storage and distribution centres are but some of the activities that will generate specialised jobs.

Cochin, as a whole, has a strategic location on the international seafaring route lying midway between Europe, Middle East and East Asia and the Pacific Rim. Its all-weather natural harbour and the large export of goods, especially spices and sea food makes it a very important port in India. The ICTT at Vallarpadam will tap into the large cargo movement along the international east-west sea lane. This will be a boon not just to Kerala but also neighbouring states like Karnataka and Tamil Nadu as well as the union territories of Lakshadweep and rest of India. The estimated value of the logistics market in India is $14 billion and will grow at a rate of 7-8 per cent.

Indian and multinational logistics companies operating in India cater to millions of retailers, manufacturers and service sector companies. This will translate into lakhs of jobs over the next few years.

How better roads help in India’s rural development -ARCHIE D’SOUZA

How better roads help in India’s rural development

Archie d’souza

Better road transportation lead to greater opportunities for people living in areas connected.  In rural areas it leads to improvements in employment, education and healthcare.

We have seen in an earlier article how the Golden Quadrilateral has helped in movement of goods and in the development of areas en route.  Is this development restricted to areas close to the route?  Is there any way a hinterland can develop?  The central government has come up with just one such scheme.  It is the Pradhan Mantri Gram Sadak Yojana (PMGSY).  Here are some of its highlights.

The PMGSY was launched on 25^th December 2000 as a fully funded Centrally Sponsored Scheme to provide all weather road connectivity in rural areas of the country.  The programme envisages connecting all habitations with a population of 500 persons and above in the plain areas and 250 persons and above in hill States, the tribal and the desert areas.   A total of 59,564 habitations are proposed to be provided new connectivity under Bharat Nirman.  This would involve construction of 1,46,185 Kms of rural roads.    In addition to new connectivity, Bharat Nirman envisages upgradation/renewal of 1,94,130 km of existing rural roads.  This comprises 60% upgradation from Government of India and 40% renewal by the State Governments. 

MP and Chhattisgarh are two states where the poverty levels are among the highest in India.  In these states close to 75% of the population lives in rural areas.  While the GQ, North/South and East/West corridors are connecting several places, most villages in India, especially in these two states don't have any all-weather road connection.  Several sections of the country's rural population continue to be isolated from the mainstream.  They are thus deprived of the benefits of the country's economic growth.  Despite major road projects nearly half of the country's population continues to remain unconnected.  One of the main reasons for low or no growth in rural areas is improper road connectivity.

However, thanks to the PMGSY, things are looking up in these states.  Studies conducted by the Asian Development Bank indicate that, in villages provided connectivity under this plan, the figures from 2006 to 208 for the number of households living below the poverty line decreased by 5% in MP and 2% in Chhattisgarh.  This trend is bound to continue and the living conditions in connected villages are bound to continue improving.  This will further bring down the number of people living below the poverty line.  How has this connectivity impacted rural living conditions?  This, according to the report, has happened in the following two ways:

1.    The communities living in these areas got more reliable and quicker access to outside products, services and social linkages.

2.    It gave external service & product providers as well as social contacts better access to these rural communities.

In other words, connectivity has enabled these communities to fully access existing government services that aid rural areas.  Of the total investments under PMGSY these two state’s share has been 15%.  When completed, 9,574 km of rural roads will have been constructed.  This will significantly improve connectivity in these areas.  The number of beneficiaries of this scheme exceeds 11 million people spread over 3,207 habitations.  The socio-economic impacts can at the moment only be imagined. 

It has been mentioned time and again by several people, including yours truly, that prosperity and connectivity are irrevocably linked.  Therefore, building a nationwide network of all-weather roads in rural areas is bound to lead to a great deal of progress.  Rural connectivity is intrinsically linked to growth, employment, education and healthcare.  The plan has definitely had the desirable impact in the newly connected areas.

The ADB, which conducted this study, was the main finance provider for the plan.  However, the Bank didn't stop with just providing finance, as so often happens with financial institutions.  It sent its representatives to the places where the programme was implemented and asked them to take stock of the benefits the programme brought to the rural areas.  After a study which lasted all of three years, they came to the conclusion that the programme is quickly resulting in a socio-economic transformation in rural India.  The Bank found that the presence of all-weather roads has directly or indirectly contributed to improvements in the areas of connectivity, transportation, government services, livelihood, commerce, education, health, land value, infrastructure, social interactions and gender empowerment.  The entire report is available on the bank’s website.  Figures released by the Union Ministry of Rural Development indicate that 1.67 L unconnected habitations are eligible for coverage.  This will lead to the construction of approximately 3.71 L km of roads for new connectivity.

In 2005, the union government announced another major plan to rebuild rural India.  The following were its objectives:

·      Every village to be provided electricity: remaining 1,25,000 villages to be covered by 2009 as well as connect 2.3 crore households

·      Every habitation over 1000 population and above (500 in hilly and tribal areas) to be provided an all-weather road: remaining 66,802 habitations to be covered by 2009

·      Every habitation to have a safe source of drinking water: 55,067 uncovered habitations to be covered by 2009. In addition all habitations which have slipped back from full coverage to partial coverage due to failure of source and habitations which have water quality problems to be addressed

·      Every village to be connected by telephone: remaining 66,822 villages to be covered by November 2007

·      10 million hectares (100 lakhs) of additional irrigation capacity to be created by 2009

·      60 lakh houses to be constructed for the rural poor by 2009

While the agenda, according to the ministry, is not new, the effort here is to impart a sense of urgency to these goals, make the programme time-bound, transparent and accountable. These investments in rural infrastructure will unlock the growth potential of rural India.

“Rural roads”, as one can see, is one of the six components of Bharat Nirman.  To repeat its objective it is to set a goal to provide connectivity to all habitations with a population of 1,000 persons and above (500 persons and above in the case of hilly or tribal areas) with an all-weather road.  A total of 59,564 habitations are to be provided new connectivity under the plan.  To achieve this 146,185 km of rural roads need to be constructed.  Besides new connectivity, under the project up-gradation/renewal of 194,130 km of existing rural roads will be taken up.  This comprises 60% up-gradation from the Union Government and 40% renewal by the State Governments.  79,938 habitations, almost 73 per cent of the sanctioned habitations, have been provided all-weather road connectivity till September 2011.

Road connectivity to rural areas needs to be speeded up if India needs to bring its rural folks into the mainstream.  A lot of private sector investment has come in for developing the country's highways.  The private sector could also play a role in connecting rural India through good road projects.  However, unlike highway projects, rural roads cannot become a revenue earner for the private sector as it will be impossible to either collect tolls or develop real-estate.  The only way for private-sector involvement here is for companies to make it as a part of Corporate Social Responsibility.  The union and state governments should give the necessary encouragement.

According to data revealed by the Planning Commission 8% of India has come above the poverty line in five years.  As per the report, the percentage of poor in India has declined from 37.2% in 2004-05 to 29.8% in 2009-10.  Rural poverty has declined from 41.8% to 33.8% and urban poverty 25.7% to 20.9%.  The new estimates are on the basis of poverty line that averages Rs 672.8 per month in rural areas and Rs 859.6 per month in urban areas.  Poverty alleviation and better transportation facilities definitely go hand-in-hand.

The Golden Quadrilateral -Archie D’Souza

The Golden Quadrilateral

Archie D’Souza

The Golden Quadrilateral is a highway network, envisaged during Atal Bihari Vajpayee’s prime minister-ship.  It connects India's four largest metros, viz. Delhi. Mumbai, Chennai and Kolkata.  As these four highways form a quadrilateral of sorts, it’s been given this name.  Besides these four metros, four others from among India’s top ten, viz. Bangalore, Pune, Ahmedabad and Surat are also served by it.  It is part of the largest and most ambitious public infrastructure project in the country's history, one with a social engineering goal at its heart: Much as the U.S. interstate highway system mobilized American society and grooved the post-war economy, India hopes the Golden Quadrilateral will push the country's economic engine into overdrive—bringing the benefits of growth in its booming metropolises out to its impoverished villages, where more than half the population lives.  It is the first phase of the National Highways Development Project (NHDP).  It consists of 5,846 km (3,633 mi) of four/six lane express highways at a cost of 60,000 crore (US$ 13.2 billion).  In January 2012, India announced that the four lane GQ highway network was complete.  The 5,846 km of highway connects many of the major industrial, agricultural and cultural centres of India.  Most of the stretches within the GQ are not access controlled.  However, certain safety features such as guardrails, shoulders, and high-visibility signs are in use.

The project was initially announced in 1998 by Sri Vajpayee.  He has also been credited with giving the project its grandiose name.  The Golden Quadrilateral is exceeded in scale only by the national railway system, most of it inherited by us from our colonial rulers who started constructing it in the 1850s.  For decades after independence, thanks mainly to shortage of resources, India’s founding fathers believed that socialism was ideal for India’s economic growth.  This was in keeping with the ideals of our founding fathers, Gandhi and Nehru.  Severe restrictions on imports were also in place.  In the mid-eighties, thanks to growing prosperity and availability of capital, the country began opening its markets to foreign investment.  From a controlled economy we started moving towards a free-market one.  This led to very high levels of economic growth.  With Vajpayee’s predecessors having laid the foundation for a modern India with high levels of growth, it was only natural that he continue the process.  Roads were the most visible way to show that the government business even though they may have hardly looked at other areas.  The project started by him was successfully carried forward by successive administrations led by PM Manmohan Singh. 

Today, fourteen year later, the GQ is considered to be among the most elaborately conceived highway systems in the World.  While India was growing into a visible soft-power worldwide, PMs Vajpayee and Singh realised that hard infrastructure to needs to be developed.  So, along with implementing this highly visible project PM Singh conceived of another almost invisible project – the Pradhan Mantri Gram Sadak Yojana (PMGSY).  We shall be looking at this in more detail in another article.  Coming back to the GQ it is considered by many as a masterpiece of high-tech ingenuity.  Along with the strides we’ve made in software, this could be looked upon, in many ways, as a calling card for India in the 21^st Century.  The GQ definitely makes for an excellent sight on a TV screen or computer monitor.  There’s plenty in it that should make its designers and the rest of the country proud.

While the road surface is state-of-the-art, the system and design too are technologically very advanced.  So advanced, that the designers claim that one day, the tiniest of ruptures will be detected by sensors and communicated to maintenance crews who will be immediately dispatched to the place needed.  Toll collections too, already computerized could be instantly tabulated against long-term projections.  Accidents, whenever and wherever they occur, would trigger instantaneous responses from nearby emergency teams, who are all ready for action at very short notice.  The building of the highway has per se triggered a great deal of economic activity, generating development and a great deal of employment with it.  This has definitely quickened the pulse of the nation.  We shall have a look at the economic impact of the GQ and other infrastructure projects at a later stage.  What it has done that is visible to all is that it has boosted traffic volumes and, with it, brought crores of workers from rural areas moving into medium-size and large cities.

When it was first envisaged, the government had estimated that the GQ project would cost a staggering Rs 60,000 crore at 1999 prices.  However, it is one of the very few, perhaps only, government project that has been completed built under-budget. At 30,858 crore as of AUG 2011, the amount of money spent by the central government is about half of initial estimate.  Another announcement was made in September 2009.  The existing four-lane highways would be converted into six-lane ones.  This expansion has not been progressing as quickly as desired.  There are two main reasons for this, one – land acquisition constraints and two – re-negotiation of contracts.

The agency managing the GQ project is the National Highways Authority of India (NHAI), which comes under the Ministry of Road Transport and Highways (NHAI).  India’s first controlled-access toll road, the Mumbai-Pune Expressway is part of the GQ.  This project, however, is not funded by the NHAI and is not on the GQ’s main route.  This has been funded by the Infrastructure Leasing and Financial Services (IL&FS), a major contributor in infrastructure development in India.  The IL&FS has also contributed in a big way in the GQ project.

Economic benefits

One of the most direct benefits of the GQ project is that it establishes better and faster road transport networks between many major cities and ports.  This obviously provides a major impetus to smoother movement of products and people.  The impact is not restricted to larger cities and major ports.  Also enabled is industrial development in smaller towns.  This helps in job creation in these places.  With job creation come increased purchasing power resulting in demand for agricultural produce and consumer products.  Better access helps farmers transport their produce to the local markets faster with reduced spoilage.  Produce can also be moved from interior places to the bigger towns and cities as well as to ports and airports for export.  Road construction, in the first place, drives economic growth directly pushing up the demand for cement, steel and other construction materials.  This is a sector that grew by 12.6% in the financial year ending March 2008.  The transport sector is another direct beneficiary as better highways give a further impetus to truck transport throughout India.  The GQ’s sheer size at over 5800 km is phenomenal.  It connects all the major population centres in the country, viz. Delhi, Mumbai, Chennai and Kolkata.

A huge economic fallout from it is very similar to the effects that the US highway system built in the 1920s & 50s and the German autobahns had.  The improved connectivity aided goods and services to be moved to and from very isolated areas leading to the economic development of these places and free movement of people.  As we have seen in the previous paragraph, the construction of the highway led to several employment opportunities and demand for cement, steel and other construction materials.

Manufacturing is another area which has received a great boost leading to the creation of a great deal of jobs.  The Hyundai plant near Chennai directly employs around 5400 people.  This not only feeds the nation’s increased desire for cars but also helps in several other ways.  Like several other companies on the GQ, Hyundai creates ancillary and support industries, leading to indirect employment.  An automobile manufacturer will require to be supplied with accessories like windshields, headlights, rear-view mirrors, carburettors, shock-absorbers, etc.  Many of these units will be located in the proximity of the purchaser.  All these companies, Hyundai include, need the services of truck drivers, warehouse workers, record-keepers, etc.  They also need to use the services of freight forwarders and carriers.  Hyundai’s cars are not just sold in the domestic market.  They are also exported.  This led to the commencement of RO-RO shipping services from Chennai, a possible boon to other auto manufacturers.

Hyundai is just one example of a successful manufacturing unit on the GQ.  Every factory that exists on the GQ, including Hyundai, creates its own ecosystem.  Employees and visitors need transportation, cafeterias, etc.  This has led to opening of scores of specialised niche units.  These in turn are quickly filled by energetic entrepreneurs.  Remember, India has more of them than any other country.  Only Thailand has a higher percentage of its population compared to India engaged in entrepreneurship.  Hyundai, itself has 83 ancillary units in the vicinity of its factory.  The cascading effect is tremendous.

Taking a cue from China, the Indian government created or let the private sector set up several Special Economic Zones (SEZs).  This is a topic that shall be dealt with in detail elsewhere.  These SEZs provide new state-of the-art infrastructure, tax concessions, freedom from stringent labour regulations, etc. to any company – Indian or foreign – that sets up units here.  The products/services made here are mainly for export markets, most of them to the developed World.  Most of the companies that have set up units in the SEZs are foreign MNCs taking advantage of the highly skilled work-force and low input costs.  There are, today, over 200 SEZs all over India.  These earn the nation over US$ 15 billion in foreign exchange, thanks to the exports generated from units situated there.  In addition, we have over half a million people employed in these SEZs.  One factor that has played a significant role in India’s high GDP & export growth is the vitality of these ecosystems.  This factor is definitely partly, if not wholly, responsible for India's consistently high economic growth rate of 9 percent a year for most of the decade.  In terms of economic growth, we are second only to China among comparable market economies.

However, unlike China, India is a vibrant democracy where people’s representatives are elected and need to stand for re-election every five years.  The elected members of national & state legislatures and local bodies cannot afford to antagonise their voters.  Freedom of expression and the right to protest are enshrined in the Indian Constitution.  Therefore, protests by affected people, very often peaceful but sometimes quite violent, are a regular phenomenon.  Clashes take place over land acquisition for the highway, both new and expanding, and setting up of industrial clusters, which are what SEZs are, and individual units.  Many experts on the subjects have termed these as inevitable.  Remember, we live in a very densely populated country.  We have more than a billion people living in an area about a third the size of the United States.  So, it is very unlikely that even a single square metre of viable land would remain unspoken for.  New factories gobble up farms.  Widening highways leads to the displacement of several small shops, restaurants, other businesses and residences too.  While roads do change everything and are a boon from several people, not all of the change affects everyone positively. 

Although land disputes are not within the scope of our discussion, they are so common that one cannot avoid touching the topic.  Whenever a new highway is built or an existing one widened, it destroys restaurants and shops as well as farmlands and residences.  True, landowners are compensated.  However, quite often, the levels of compensation are not always enough.  Politicians too very often incite violence taking advantage of the genuine plight of farmers who very often know nothing else besides farming and are left helpless without their land.

Yet, the GQ has been a great boon to the agricultural communities.  Thanks to improved transportation, as we have already seen, agricultural produce from remote areas is able to move to the biggest of cities.  Compared to the numbers of farmers displaced those that still have land are much more numerous.  Paved roads, many of them constructed under the PMGSY, connect villages to secondary highways and then to the GQ.  Another innovation, the cell phone, has helped these farmers to trade with buyers in distant locations.  Markets have been opened up beyond nearby towns and villages.  Automobiles and the better roads also cut down the amount of time needed to haul goods to markets.

Without a shadow of doubt, the automobile industry provides employment opportunities to a great deal of people.  The automobile also helps improve the movement of people and goods.  Today, the annual sale of passenger cars exceeds 1.5 million in India.  However, there is a downside also to it.  What is good news for Hyundai, Ford and other auto units on the GQ can be bad news elsewhere.  In spite of huge oil reserves, India has yet to reach self-sufficiency in energy production.  We rely heavily on coal and foreign oil imports for energy needs.  This means that a volatile global oil market could potentially cripple not only automobile manufacturers, but also the people who drive the automobiles.

However, opportunities do exist that can convert these shortages into our favour.  India has still to tap its resources in areas like solar, wind, hydropower, and biomass production. An estimate prepared by the Global Energy Network Institute reports that the sum of India’s potential renewable energy sources is 152,000 megawatts.  This interestingly, is greater than the current total installed generating capacity of the entire country.  Luckily, the governments at the centre and states are well aware of the dangers of relying primarily on fossil fuels for energy.  Hence, they are developing a regulatory framework to promote energy diversification.

The developed World has still to recover from the recession that hit it not long ago.  Despite this fact and the continuing economic downturn there, India is heavily industrializing.  While population growth continues at menacing levels the markets for goods and services is also growing rapidly.  It is this persistent economic growth that is leading to increased incomes for more people and therefore further automobile sales.  This will mean greater demand for energy.  Therefore, the nation will be forced to seriously consider renewable fuel sources not just for electricity, but also consider alternative fuels for vehicles. 

In any situation, problems and benefits exist side by side.  Our nation’s workforce today is highly motivated and creative.  Companies have been offered tax holidays/concessions and infrastructure in these SEZs which are dotting the countryside.  The result is greater foreign and domestic investment leading to greater employment.  The number of Indians living below the poverty level has seen a dramatic drop in recent decades.  However, there is a downside to it.  Improving transportation of products requires a better highway system.  This results in displacing farmers and using their land for roads instead of growing crops.  More cars on the road lead to higher pollution and congestion levels.  Safety is also a factor that needs to be taken into account.  However, the end result is a prosperous and industrialized India.