DoingBusinessinIndialogisticsoverview-123616380339-phpapp02

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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
http://www.nhai.org/gqmain_english.htm


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http://www.nhai.org/gqmain_english.htmhttp://www.nhai.org/gqmain_english.htmhttp://www.nhai.org/portmap_english.htm


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http://www.nhai.org/portmap_english.htmhttp://www.nhai.org/portmap_english.htm


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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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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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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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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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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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Thank You!

Queries Welcome

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