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India Freight Transport Report Q1 2010Published by: Business Monitor International Published: Jan. 6, 2010 - 76 Pages Table of Contents
AbstractThe Dedicated Freight Corridor Corporation of India (DFCCI) has awarded the first two contracts for the first phase of the country's freight corridor projects. This marks the beginning of India's largest railway project, which is an effort to divert some of the freight traffic away from the existing railway system. According to the government's press information bureau, the two first contracts have been awarded, but the press release does not mention the name of the contractors. The first contract is for the construction of the 105km section between Sonnagar and Mughalsarai on the eastern branch. The second contract is for the construction of 54 bridges on the Surat-Vivar section of the western branch. This marks the beginning of India's largest railway infrastructure project, a freight-dedicated corridor that will link New Delhi with Mumbai in the east and Kolkata in the west. The eastern corridor runs from Sonnagar to Ludhiana, a total length of 1,279km. The main product that will be carried on the eastern corridor is expected to be coal. Which will be transported from eastern coal fields to power plants in the northern states of Uttar Pradesh, Delhi, Harayana, Punjab and parts of Rajasthan. According to the traffic projections in the feasibility studies, freight carried on the eastern railway will be 75.6mn tonnes annually in 2017 and this is predicted to reach 91mn tonnes by 2022. Close to 85% of total traffic will be from Uttar Pradesh. Meanwhile, the western corridor will run from the Jawaharlal Nehru Port to Dadri via Vadodara, Ahmedabad, Palanpur, Phulera and Rewari. This link will mostly service container traffic from the port as well as commodities, principally fertilisers, grains, salt, coal, iron and steel. The traffic projections for the western corridor indicate that container traffic will rise from 3.8mn twenty-foot equivalent units (TEUs) in 2017 to 5.3mn TEUs in 2022, while total cargo (excluding containers) will rise from 10.9mn in 2017 to 16.6mn in 2022. The government of India, is creating a dedicated freight corridor to divert some of the traffic on its vast mixed railway network, where capacity utilisation varies between 115% to 150%. We note that the projects have attracted international interest, notably from Japan, which is India's top export destination. Japanese involvement began in earnest in 2006, when a memorandum of understanding (MoU) was signed between the Indian and Japanese governments as part of the Japan-India Special Economic Partnership Intiative. The MoU paved the way for co-operation in the Industrial Corridor project, and a loan from the Japanese government via the Japan Bank for International Cooperation (JBIC) is to fund 66% of the project. The total estimated cost is US$8.5bn. The Ministry of Railways will make a partial equity investment in the project via the DFCCI, and it will also use loans from multilateral organisations. According to BMI's infrastructure data, India's railway infrastructure industry value will account for around 9.4% of total infrastructure industry value throughout our forecast period. We anticipate the initial investments in this freight railway programme to fuel rail infrastructure industry value real growth in 2010 and 2011, and there is further upside potential to our forecasts. Since our last report, we have maintained our forecasts for near-term Indian GDP growth, although we have become more bullish on the medium term. We estimate 2009 growth at 6.1%, followed by 6.4% in 2010 (both unchanged) and we have raised the outlook for 2011 to 7.9% (up from 7.0%) and for 2012 to 8.4% (up from 7.0%). Across the 2010-2014 forecast period, we now project average annual GDP growth of 7.7% per annum, a drop on the 8.2% of 2005-2009. Therefore, in spite of the global economic slowdown in 2009, we still see a solid foundation for growth in the freight transport industry. We have maintained earlier mode-specific freight turnover forecasts. On the shipping side, we edged down the forecasts to take account of lower growth in world trade. We have also reduced the airfreight forecast, in view of the fall in demand and financial difficulties faced by the industry. As a result of all these factors, total freight carried, measured in billion tonne-km (bntkm), is expected to grow by an annual average of 11.2% throughout the forecast period.According to our estimates, transport and communications GDP rose 6.2% in 2009, 0.1pps faster than overall GDP, which we estimate to have increased by 6.1%. For 2010-2014, we expect the transport and communications sector to continue outpacing the economy by a small margin in value terms. It will achieve average annual growth of 7.8%, versus 7.7% for overall GDP. The value of transport and communications GDP will rise to US$208.2bn in nominal terms by 2014, or 7.7% of India’s GDP. Despite the adverse international climate, BMI expects overall investment in Indian infrastructure will gather pace over the next five years. Several major road-building projects are already under way, as well as airport expansion plans. Perhaps more so than in other countries, there will be a close link between the pace of structural reform and the rate at which new investment begins to flow into infrastructure projects. Those areas that stay predominantly under public-sector control are likely to see slower progress on new infrastructure projects, which will be constrained by fiscal austerity and bureaucratic delays. In our view, the growth potential in the transport sector is likely to be the greatest in those areas where the authorities are prepared to contemplate reforms, as well as (reasonably briskly) contemplating opening up the current monopolies in the country to greater competition. A case in point is road haulage, where once the ‘infrastructure deficit’ begins to be closed, numerous factors will underpin dynamic future performance. These range from: The increased demand for door-to-door logistics; the move to higher value/lower bulk shipments; the rising size of the vehicle fleet and the new impetus to improve and extend the network; and, using private sector highway operators and build-own-operate (BOT) schemes. We are predicting that road freight turnover, measured in bntkm, will rise by an average of 11.7% every year in 2010-2014. This will be above the rate of GDP growth. Amid some new and encouraging signs that reform is slowly taking hold within the vast Indian Railways company, we are becoming more optimistic about rail freight prospects. We forecast that freight carried by rail will rise by an annual average expansion of 9.0%. All other transport modes should experience broadly comparable growth, with international air cargo turnover gaining an average 9.6% per annum. Sea transport through India’s major ports, measured in tonnage handled, will rise an average 6.5% per annum. A major factor over the next few years driving change will be the rising competitive pressures from cargo operators among India’s immediate neighbours and main trading partners. Get Full Details About This Report >> |
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