Post on 14-Apr-2018
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Logistics, Freight &
Customs Issues
In India
by Rajeev K Chopra
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Topics
The Relationship of Market Entry Strategyand Logistics in India
Most Popular Question
Networks of Relationships an AdaptableModel for Exporters
Designing Your Logistics Plan KeyPractical Issues
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The Relationship of Market EntryStrategy & Logistics in India
Mode of MarketEntry
Types of Logistics Activities that are Outsourced
Export direct tocustomer,distributor or
reseller
Freight Forwarding, Express Courier, CustomsClearance, Break-Bulk, Delivery, FundManagement, Customer Service, Order Taking,
Warehousing, 3PL, 4PL
Manufacture inIndia
Import of raw materials by freight forwarding,Customs Clearance, Delivery to ManufacturingFacility, Warehousing, Distribution, Delivery, 3PL,4PL
Finishing ofProduct in India
Import of unfinished product by freight forwarding toFinishing Centre, Customs Clearance, Delivery,Re-export by Freight Forwarding, CustomsClearance, Delivery
Mix All of the above
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Most Popular Question
The most popular question I amasked by CEOs is IF WE DO NOT
HAVE OUR OWN COMPANY ININDIA, HOW CAN WE DO
BUSINESS THERE AND GET
PROFITS REPATRIATED BACK TOOUR HOME COUNTRY?
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Networks of RelationshipsAdaptable Model for Exporters
Partner ALogistics
Service
ProviderPartner B
Importer Of
Record (IOR)
Partner C
Distributor,
Reseller or
Customer
Partner A,
B or C can
be Agent
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Networks of RelationshipsAdaptable Model for Exporters
Channel of Distribution - Goods
Channel of Distribution - Funds
MfrLogistics
Partner
IOR
(Agent)
Customer/
Reseller
MfrLogistics
Partner
IOR
(Agent)
Customer/
Reseller
Govt.
(Duties,
Taxes)
Profits (or Surplus after paying suppliers and taxes)
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Repatriation Of Profits
COD Fund management up to USD$5,000per remittance can be repatriated abroad
Agent after paying and deducting all fees,
suppliers, duties and taxes in India, balanceprofit can be repatriated abroad by Agent
Branch Office after paying and deducting allfees, suppliers, duties and taxes in India,
balance profit can be repatriated abroad byBranch Office
Subject to Reserve Bank of India and Govt of India guidelines
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Design Your Logistics PlanKey Practical issues
Characteristics of Logistics in India
Modes of transport
Customs Taxes
Configuration of Supply Chain
SEZs
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Different from developed nations in three
important aspects
Relatively small manufacturing base
High logistics cost relative to GDP
The very low penetration of specialist 3 PL
providers in the country (< 5%)
Logistics In India
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Outsourcing Trends in India
Added
Value Returns / Services
Transportation
Procurement
Express / Cour ier
Customs Brokerage
Warehousing
Order Processing
I nventory Management
Invoicing
Time
Current Debates
3PL Future Debates
4 PLPredominantly Outsourced
Source: MDI Study 2004
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Outsourcing
What are the major reasons foroutsourcing of supply chain activities?
Process Effectiveness24%
Lower Cost27%Lack of Internal
Capability
11%
Investment Reasons
12%
Strategic Reasons26%
Source: MDI Study 2004
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Indias Economy & Logistics Cost
Indias GDP is USD 691 billion and would touch USD 1.4trillion in the next two decades (as per Goldman Sachs).
Currently it is the 10th largest economy
Indias Logistics Spend is currently 13% compared to 8.7% ofthe US.
Enough Scope to reduce the Logistics Spend which would
require growth of Logistics Service Providers and
improvement in Infrastructure!!
Contribution to Work ForceGDP Employment
Agriculture 21% 60%
Manufacturing 28% 17%
Service 51% 23%
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Components of Logistics Cost35%
25%14%
11%9% 6%
TransportationInventoriesLossesPackagingHandling & WarehousingCustomer's shopping
Nearly 40%( Inventory carrying costs +losses) of logistics cost is directly co-relatedwith infrastructure.
Jus t imagine the po tent ial saving s by
having eff ic ient and good infrastructu re!!!
Logistics CostsKey Driver of Logistics Strategy
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Surface Infrastructure in India -A Snapshot
Though Indian Railways
freight volumes have
increased, its share of total
freight movement has
reduced from 70% in 1951 to
30% in 1995.
For total route length of
62,725 km, only 21% is
electrified.
Rail connectivity to ports,development of railways to
the hinterland and faster
freight trains are lacking.
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New Highway Project
Golden Quadrilateral Project
Reduced transit time
More lanes; larger trucks; greater
economies of scaleIndian Road Network
Indian road network of 33 lakh Km.is second largest in the world and consists of:
Length(In Km)
Expressways 200
National Highways 66,590
State Highways 1,31,899
Major District Roads 4,67,763
Rural and Other Roads 26,50,000
Total Length 33 Lakhs Kms(Approx)
Source: www.nhai.org
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CFSs
(ContainerFreight
Stations) &ICDs(Inland
ContainerDepots)
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Infrastructure Development
The Silk Road route linked Chinavia Central Asia to Europe
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Infrastructure Development
Re-opening of Silk Road between Indiaand China at Nathu La
Started in July 2006
Customs, warehousing, storage and freighthandling infrastructure are being developed.
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Port Infrastructure in India -A Snapshot
Indian ports handle 3.9
million TEUs as compared
to 48 million TEUs by China.
Maritime transport accountsfor 95% of country's foreign
trade in terms of volume; yet
the infrastructure at ports is
very obsolete.
Turnaround time at ports isvery high as compared to
other countries in the
region.
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Infrastructure Development
Ports Nhava Sheva India's eight largest container ports handled about 3.8
million standard 20-foot containers last year(Containerisation International). Nhava Sheva, thebiggest port on the Indian sub-continent, shipped 2.4million containers.
It takes as long as three-and-a-half days for a ship to
unload and load at Indian ports, the government saidlast year. That compares to eight hours at Hong Kong,the world's biggest container port, which handled 22million containers last year.
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Infrastructure Development
Ports Nhava Sheva
Big congestion problem in 2004
Stacking of 16,000 TEUs against capacity of
11,500 TEUs
188 Crore in detention charges (Mar to Jul
2004); and 500 Crore loss of business for2004
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Infrastructure Development
Ports Nhava Sheva Jawaharlal Nehru Port is converting a bulk
cargo terminal into a container terminal at acost of 9 billion rupees ($205 million) and theexpanded capacity will be ready by 2010.
The port will be able to handle an additional1.5 million containers a year after the newterminal is built
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What is the best mode?
Road versus Air in India
Think twice before committing to Air;
Consider day of week
Date required for delivery
Calculate the break even points for Ocean,Air and Courier; ask your carrier to help
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Thinking multi-modal
Plan the modes according to costand speed required. Someexamples of multi-modal shipping
used today:Air from China to Singapore, Ocean from
Singapore to India Ocean from Guangzhou to Chennai, Rail
from Chennai to MumbaiAir from Hong Kong to Chennai, Road from
Chennai to South India, Air from Chennai toBOM, DEL and CCU
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Environmental Factors
Monsoon Season (June-August)
Use multi-level racking warehouses
Adopt dynamic approach to choosing airport
gateways
Fog Season (November-January)
Prepare contingencies, especially for Delhi
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SEZs (Special Economic Zones)
SEZ's are duty free enclaves and are treated as foreign territory for tradeoperations & duties and tariffs. SEZ's provide internationally competitive &hassle free environment for exports, units may be set up in SEZs formanufacture of goods, rendering of services & trading. Up to 100%Foreign Direct Investment (FDI) in manufacturing sector is allowedthrough automatic route barring a few sectors. Units in SEZs have to benet foreign exchange earners within 3 years.
Other benefits of SEZ's Exemption from customs duty on import of capital goods, raw
materials, consumables & spares
Exemption from Central Excise duty on procurement of capital goods,raw materials, consumables, spares, etc. from the domestic market
100% income tax exemption for a block of five years;
50% tax exemptions for two years; & Up to 50% of the Profitsploughed back for next 3 years under S.10-A of Income Tax Act
Reimbursement of Central Sales Tax paid on domestic purchases
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