Seeing rising volumes in transport sector: Transport Corporation of India MD

The woes of the logistic sector ranging from inadequate infrastructure, fewer linkages between various modes of freight transport, stalled GST Bill and others have rendered it uncompetitive for long now. Vineet Agarwal, managing director, Transport Corporation of India Ltd (TCI) tells Praveena Sharma he is heartened by the current government's 'talks of bolder and larger vision' and its shift in strategy from planning infrastructure to meet existing demand to creating capacity for future needs.

Logistic sector is a barometer of economic activity, what is the signal you are picking on that front?

We are currently present in 1,400 locations across the country. That gives us a sense of what is happening (in terms of economic activity). In the last quarter of the last financial year, which is the best quarter as large volumes of cargo are pushed during that period, we've seen some improvement in terms of volumes. In fact, even in the first two months (April and May) of the current financial year, we are seeing good volume growth compared to last year. So, we are feeling is that things are starting to turn around. It's not exactly there yet. There are still issues on the ground, especially in the engineering, capital goods, steel, cement and other sectors. In these sectors, the volumes are not there completely but it has started to come. I'm positive that it will only get better from now.

Are we at a bend from where we can see a turnaround? Do you see green shoots?

Somewhat, but a lot of it will be dependent on the monsoon. It is there in terms of the sentiments, but not at the actual level. We need to see some improvement in the global economy. We should definitely see better times in the next few months.

Investors are united in their lament on inadequate infrastructure. In India, that's a big hurdle. Do you see sufficient work happening on that front?

Yes, infrastructure issues do exist. There are issues in terms of the road networks, kind of roads, use of other modes of transport, etc. However, we are seeing the right kind of action being taken for them. I think the government is giving the right signal. Investment is coming in. What the minister (Union road transport and highways and shipping minister Nitin Gadkari) is talking about is relevant from future perspective. How infrastructure is created and then how logistic provider like us or manufacturing companies use it is going to be key. We have, in the past, always built infrastructure capacity to capture the existing demand and not built capacity for future demand. Whenever we have built something it is for the existing demand. Now, at least there are talks of much bolder and larger vision (for future needs). And I think that is positive.

Are you happy with the current pace of infrastructure development?

I think any new government that comes in takes time to understand the ground realities. Also, there are some constraints in the economy. In that sense, they (government) have done a reasonable job. They have kick-started a lot of things. Things could be faster but it's not so easy.

What kind of constraints are you talking about?

Constraints from the growth perspective. We are saying that things could be faster but it depends on the economy. Economy is not moving that fast. So how can things move faster?

Logistics is one of the sectors that is going to gain the most from the goods and services tax (GST) Bill. The Constitutional Amendment Bill for the rollout of GST has been languishing in the Parliament for long now. How has that impacted your plans to reap benefit from it?

Not too much. We are GST-ready. We have warehousing and distribution networks in place. When GST actually happens, it's impact will not be felt in the same year. It will take a few years because it's not something companies will adopt to right away. In the sense that they (logistic firms) currently have a certain distribution network and warehouses. It will take time for them to consolidate all that and look at it from a fresh perspective. The government has to be prepared at the check-post level. An ideal GST environment would be where the information of a freight reaches the check-post before the cargo does. That requires that everything is networked and information is available seamlessly. I still think it will take a few years for the impact of GST to trickle down at the business level.

Currently, there is overreliance on roads for freight transport while the railways is underutilised. Besides, the development of air and water (3-4%) modes for moving cargo are still abysmally low. The minister has also been emphasising on the development waterways in the country. What do you think should be the way forward?

The base infrastructure needs to be created (for waterways). That's what the minister has been speaking about. They (government) are focusing on that. Secondly, some incentives should be offered for moving cargo from roads or railways to waterways. When these things happen then the imbalance in freight transport through various modes will be addressed. Besides these, the linkages (between roads, railways, airways and waterways) should be created. You should be able to easily connect between all modes. The seaways cannot go to a factory's doorstep. You still need roads (for that). You still need trucks. So the linkages have to be created to quickly to load and unload and evacuate from ports.

The other things are documentation and legislation. The Multi-modal Transportation of Good Act does exists but it does not include domestic cargo. That legislation change needs to be done. I am quite confident that we will be able to move to other modes of transport in the next few years. That will be great for the economy too.

By when are your expecting the listing of TCI Express?

It's in the (Delhi) high court right now. We are waiting for the clearances. Once that happens, it will go through the process of registration. We have already got the shareholders and stock exchanges approvals. I am expecting the listing to happen in two months from now.

You are present in four segments – freight, express, supply chain and seaways – where are you seeing traction at the moment?

We have two business divisions which are growing much faster than the others. One is the supply chain division and the other is the express division. Growth in supply chain is mainly driven by the need for warehousing and ecommerce fulfilment. So, there's a lot of growth coming there. In the express business, we are seeing high demand from clients for freight movement by air and road. Also, we now have a lot of last mile movement by ecommerce companies. Last few years, our revenues from express business was in single digit and lower single digit because of the slowdown in the economy. This year our revenues from express and supply chain will definitely be in double digits.

You are moving up the value chain with temperature-controlled warehousing and other such services, how much will that improve your margin structure?

That's the idea. We are moving up the value chain to provide superior services to our clients and improve our margin structure. The strategy is also not to be overly or heavily invested. We want to meet 100% of our client's requirements. In that, our capex (capital expenditure) is very well thought of and well planned. What we are looking at is integrated service to our clients. When we have a pizza company, they have products like cheese, vegetables, which need to be moved and stored in cold storage. They also have products like flour, paper cup and others which need to be stored in dry environment. So, our strategy is to provide both the cold as well as dry storage. So, we are not overly investing in cold storages but are doing it very strategically. It will lead to growth, and eventually better margin over time.

Logistic costs in India are very uncompetitive. What needs to be done to address that?

First, the modal mix needs to be changed because we are too heavily dependent on road. We need to have a combination of road, rails, air and sea. Waterways are needed to bring down the logistic costs. The first step is creating infrastructure because that will help in speeding up the process. We need the right kind of infrastructure for the future. Changes in processes and legislations are essentially for better movement between states or transport modes. GST Bill is also one of things for it.

What needs to be done urgently to improve the operations of logistic companies?

There should areas locked for logistic providers. We have been advocating for 10% space in all industrial parks. In the absence of this, trucks are parked randomly everywhere. That's one. The minister has already been taking about logistic parks, where you will have truck terminals.