DFC the ray of good hope

The Logistics costs in India are amongst the highest in the World. The constituents of this cost are the transportation cost (39%), Warehousing (27%), Inventory carrying cost (24%), order processing 6% and administration about 4%.In India the share of the logistics cost is about 13% of the GDP and of this 3PL share is only 3%. In contrast in the USA the logistics costs are about 10% of the GDP and 57% of these is the share of 3PL logistics in the overall logistics. These figures are based on the assessment in the KPMG report on the skill gaps in the Indian logistics sector 2007.
The DFC will help to increase the speed of trains and hence reduce the transportation times which would also translate into lower inventory carrying costs. The DFC is designed for trains of 1500 meter length double of what IR runs today and from the beginning we may find 12000 tonne trains. The modern technology will help reduce the transportation costs and with the surplus transportation capacity it generates the market forces will come into play and we may see the freight tariff actually come down in the near future with an increase in the volumes. This is good as we may see a modal shift from road to rail which is good for the country and will also help in reducing the carbon emissions. It is estimated the savings in CO2 emissions will be about 457 million tonnes over the 30 year life of the project.
The revenue from the operations will remain with IR with the DFC being paid track access charges based on cost covering model with a return on equity. The DFC will generate surplus capacity on the IR routes on the golden quadrilateral and it is the need of the hour to see how this capacity can be used optimally so as to generate revenue for IR and also to fulfill the aspirations of the public. The DFC will become a reality by 2018-19.

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