NoN-Tariff Barriers iN The TraNspor T aNd LogisTics...

| ReseaRch RepoRt |

NoN-Tariff Barriers iN The TraNsporT aNd LogisTics secTors: iNdia

by Arpita Mukherjee & Smita Miglani

August, 2010

contents

acknowledgements i

abbreviations ii

introduction 1

1. coverage of Transport and Logistics services 5

2. Transport and Logistics services in india: an overview 7

2.1 Road Transport 12

2.2 Railways 16

2.3 Air Transport 17

2.4 Maritime Transport 19

2.5 Auxiliary and Logistics Services 21

2.6 Express Delivery and Courier Services 22

3. india-eU Trade, investment and collaboration 25

3.1 Trade in Goods and Services and Investment Flows 26

3.1.1 Trade in Goods 26

3.1.2 Trade in Services 30

3.1.3 Bilateral Investment Flows between India and the EU 32

3.2 The Primary Survey 33

3.3 India-EU Collaboration: Implications for the Transport Sector 43

3.4 Scope for Enhancing Trade, Investment and Collaboration 46

4. Barriers faced by eU companies in india 49

5. addressing Barriers through international Negotiations 63

6. reform requirements in india 69

7. conclusion and the way forward 73

references 77

appendix a 84

appendix B 90

appendix c 108

Non-Tariff Barriers in the Transport and Logistics

sectors: india

List of Tables

Table 2.1: Cumulative FDI Inflows in the Transport Sector: April 2000 – April 2010 8

Table 2.2: FDI Policy in India: Transport and Logistics 11

Table 2.1.1: Automobile Production Trends (Number of Vehicles) 13

Table 3.1.1.1: Leading EU Countries Exporting to India and Products Exported 29

Table 3.1.2.1: Ranking of India and the EU in Global Services 30

Table 3.1.2.2: India’s Trade in Services with the EU in 2008 31

Table 3.1.3.1: FDI Inflows from the EU: January 2000 – November 2008 32

Table 3.2.1: Sampling Frame 34

Table 3.2.2: Perception Ranking of Factors Responsible for Growth in India 35

Table 3.2.3: Snapshot of European Automobile/Auto-component companies’ presence in Indian market 37

Table 3.2.4: Snapshot of European Construction and Consultancy (C&C) companies’ presence in the Indian market 39

Table 3.2.5: Snapshot of European Logistics Service Providers (freight forwarders, express delivery services providers, customs clearing agents, etc.) in India 42

Table 3.4.1: Technical Standards for Logistics Sector: India and the EU 47

Table 4.1: Ranking on World Bank’s Doing Business Report (2010) 50

Table 4.2: Rankings for BRIC countries, Germany and Poland on Selected Parameters 51

Table 4.3: World Bank’s Logistics Performance Index (LPI): Ranks of Selected EU Member Countries and India 51

Table 4.4: Barriers Faced by EU companies in India by Nature of Business 53

Table 4.5: Traffic Handled at Major Indian Ports versus Port of Rotterdam 57

Table 4.6: Setting up a Warehouse: Procedures and Days Required 59

Table 5.1: Commitments and Revised Offers in Transport and Logistics: India and the EU 67

List of figures

Figure 2.1: Investment Growth Rates (at constant 1999-00 prices) 10

Figure 3.1.1.1: India’s Major Supplier Countries and Export Destinations for Transportation Equipment (2007-08) 27

Figure 3.1.1.2: India-EU Trade in Transportation Equipment 28

Figure 3.1.1.3: Indian Exports to EU Member States and EU Exports to India in 2007-08 28

Figure 3.1.3.1: Total Technology Transfers Approved by Country and Sector 33

NON-TARIFF BARRIERS IN THE TRANSPORT AND LOGISTICS SECTORS: INDIA

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acknowledgements

We are grateful to Dr. Kumar, Director and CE, ICRIER, for giving us the opportunity

to work on the relationship between India and European Union and to our colleague

Ramneet Goswami for her contribution to this paper. Thanks are due to Prasid

Chakraborty of SRG Consultancy Marketing Planning Services and his team for

conducting the survey and R.V. Anuradha for providing the legal input. We would also

like to thank the survey participants for their time and valuable inputs. Dr. Renu Gupta

for copyediting and Anil Kumar for formatting deserve special mention.

For any queries related to this paper, please contact Arpita Mukherjee, Professor,

ICRIER at [email protected] or Smita Miglani, Researcher, ICRIER at smiglani@icrier.

res.in. Tel: (91-11) 43112400, Fax: (91-11) 24620180.

JeL classification: F13, F14, F53, L74, L91, L92, L93, L98, N75

Keywords: Transport, Logistics, Trade, India, EU, Non-Tariff Barriers


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abbreviations

3pL Third Party Logistics

4pL Fourth Party Logistics

aai Airports Authority of India

aTf Aviation Turbine Fuel

BoT Build-Operate-Transfer

BTia Broad-based Trade and Investment Agreement

cfs Container Freight Stations

cha Custom House Agents

cii Confederation of Indian Industries

cNg Compressed Natural Gas

coNcor Container Corporation of India

cso Central Statistical Organisation

csT Central Sales Tax

cWc Central Warehousing Corporation

c&f Clearing and Forwarding

dfc Dedicated Freight Corridor

dgca Director General of Civil Aviation

dgfT Director General of Foreign Trade

dgs Director General of Shipping

dipp Department of Industrial Policy and Promotion

edi Electronic Data Interchange

eU European Union

fci Food Corporation of India

fdi Foreign Direct Investment

fipB Foreign Investment Promotion Board

fTa Free Trade Agreement

fTWZ Foreign Trade Warehousing Zones

gaTs General Agreement on Trade in Services

gdp Gross Domestic Product


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gQ Golden Quadrilateral

grT Gross Registered Tonnage

gsT Gross Tonnage

gT Goods and Services Tax

iaTa International Air Transport Association

icd Inland Container Depots

iT Information Technology

JNpT Jawaharlal Nehru Port Trust

LcV Light Commercial Vehicles

MfN Most Favoured Nation

MMTa Million Metric Tonnes per Annum

MT Million Tonnes

MTg Multimodal Transport of Goods

MTo Multimodal Transport Operator

Nhai National Highways Authority of India

NhBf National Highways Builders Federation

Nhdp National Highway Development Programme

ppp Public-Private Partnership

psU Public Sector Undertaking

pWd Public Works Department

r&d Research and Development

rBi Reserve Bank of India

spV Special Purpose Vehicle

TaMp Tariff Authority of Major Ports

TeU Twenty-foot Equivalent Units

TciL Transport Corporation of India Limited

Usa United States of America

UsTr United States Trade Representative

WTo World Trade Organization


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introduction

In an emerging economy like India, transport and logistics services play a crucial role

in boosting economic growth, opening new market opportunities, facilitating trade

and improving the overall competitiveness of the domestic industries. Prior to 1991,

India followed a closed-door policy. During that time, the government was the main

provider of transport services. Although there was some private participation in certain

transport and logistics services such as trucking services and freight forwarding, the

scale of private investment was low and the logistics chain was highly fragmented.

Prolonged government monopoly led to monopoly-induced inefficiencies and low

productivity. In the 1990s, when India embarked on an ambitious reform programme,

trade volumes increased but the transport infrastructure was inadequate to handle it.

Moreover, government funding could no longer support the growing need for transport

and the sector was gradually liberalised to attract private/foreign investment. Thus,

liberalisation and reforms in transport services became an integral part of the overall

reform programme. Increase in trade volumes also led to considerable pressure on the

operating environment of the existing transport infrastructure, forcing it to adopt new,

improved and more reliable technology. Technological developments and innovative

business practices led to a gradual integration of different modes of transport and the

logistics chain.

Post-reforms, India is one of the fastest growing economies of the world, growing at

an average annual rate of over 7 per cent since 2004. It has been estimated that if the

Indian economy grows at around 7 per cent on average, the transport demand will

grow by 10 per cent annually.1 Thus, India is under continuous pressure to upgrade

the transport and logistics infrastructure. Unlike countries like China, government

investment in transport is declining and the share of private investment is increasing.

Foreign investment in the transport and logistics sector also increased significantly.

This sector accounted for around 14 per cent of the cumulative Foreign Direct

Investment (FDI) inflows between April 2000 and April 2010.

The growing Indian market has attracted many European companies that are now

among the major investors in the transport and logistics sectors in India. They

operate across different segments of transport such as transport-related construction,

automobile and component manufacturing, freight forwarding and express delivery,

1 Directorate General of Shipping (2004).


1INTRODuCTION

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and maintenance and consultancy services, among others. The modes of operation

vary from wholly-owned subsidiaries to joint ventures and representative offices.

Many of them do projects for the Indian central, state and local governments.

India and the European Union (EU) are currently negotiating a Broad-based Trade

and Investment Agreement (BTIA) which is likely to be signed by the end of the

year 2010. This agreement will cover goods, services, investment, government

procurement, and subsidies, among others and is likely to enhance trade, investment

and collaboration between India and EU member states by removing tariff and non-

tariff barriers. The EU is a major proponent of liberalising transport and logistics

sectors in its multilateral and bilateral agreements and it will put pressure on India to

remove the trade barriers. At present, India’s commitments in transport and logistics

services in the WTO (World Trade Organization) and bilateral agreements (such as the

India-Singapore Comprehensive Economic Co-operation Agreement) is lower than the

level of autonomous liberalisation. This provides opportunities for the EU to secure

liberalisation commitments through the BTIA.

In the above context, this paper examines the non-tariff barriers faced by companies

from EU member states in the transport and logistics sectors of India. The barriers

include market access barriers (such as FDI restrictions), national treatment barriers

(or discriminatory barriers such as subsidies to local companies), regulatory barriers

(i.e., barriers relating to regulation, licensing, technical standards, etc.) and other

barriers (such as anti-competitive practices and pricing). The paper covers railway

transport, road transport, air transport, maritime transport, storage, warehousing

and other auxiliary services, and express delivery services. The paper does not cover

inland waterways since it is not an important mode of transportation in India and the

presence of European companies is limited.


2 INTRODuCTION

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The structure of the paper is as follows:

�� Section 1 provides the coverage of transport and logistics services.

�� Section 2 provides an overview of the transport and logistics sector in India,

emphasising recent trends and developments, the regulatory framework,

extent of liberalisation and growth prospects.

�� Section 3 analyses India-EU trade, investment and collaboration in transport and

logistics services.

�� Section 4 lists the barriers faced by European companies in India.

�� Section 5 examines how these barriers can be addressed through international

negotiations, specifically the India-EU BTIA.

�� Section 6 discusses the reforms that are required to improve productivity,

efficiency and global competitiveness of the transport and logistics sector in

India and enable the country to benefit from liberalisation under the BTIA.

�� Section 7 draws the main conclusions.


3INTRODuCTION

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1. coverage of Transport and Logistics services


5COvERAGE OF TRANSPORT AND LOGISTICS SERvICES

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The definition of transport and logistics services and its coverage has evolved over

the years. It broadly covers different forms of transport such as roads, railways,

air, and maritime; transport infrastructure like ports and airports; transport-related

construction like road construction; and services auxiliary to different modes of

transport like storage, warehousing and cargo handling. Logistics can be defined as

“the process of planning, implementing, and controlling the efficient, cost-effective

flow and storage of raw materials, in-process inventory, finished goods and related

information from point of origin to point of consumption so as to meet customer

requirements.”2 With technological developments, emergence of multimodal

transport facilities and development of global supply chains, transport and logistics

services have been integrated with other services such as information technology (IT)

and new transport and logistics services are evolving. For instance, Express Delivery

Services (EDS) have now evolved as a specialised form of logistics services which

include integrated door-to-door transport and quick delivery of time-definite shipments

of documents, samples, parcels, etc.

The EU follows a broad definition of logistics services which includes core logistics

services such as storage and warehousing, related freight logistics services like

maritime freight transport services, and non-core logistics services such as courier/

express delivery services and technical testing services. The EU seeks to get

commitments in a broad range of transport and logistics services from its trading

partners in the WTO and Free Trade Agreements (FTAs) so that companies from EU

member states have wider market access and are able to offer integrated services.

The EU also seeks non-discriminatory access3 to transport infrastructure and facilities

and regulatory certainty and transparency.

2 CII-KPMG (2007).

3 Non-discriminatory access means there should not be any preferential treatment to domestic service suppliers (for example, subsidies, lower port/airport charges, cargo reservations, etc.).


6 COvERAGE OF TRANSPORT AND LOGISTICS SERvICES

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2. Transport and Logistics services in india: an overview


7TRANSPORT AND LOGISTICS SERvICES IN INDIA: AN OvERvIEw

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The transport and logistics sector in India witnessed significant growth in the post-

liberalisation period. Since 1991, India’s international trade has increased almost

nine-fold, creating a huge demand for transport. This growth was further propelled

by the development of India as a manufacturing hub and the growth of services

sectors like retail. At present, the transport sector contributes significantly to India’s

Gross Domestic Product (GDP) (around 6.4 per cent in 2007-08), employment (about

40 million people in 2007-08)4 and FDI inflows (Table 2.1). The logistics industry is

valued at approximately $90 billion (€63.83 billion),5 employing 45 million people and

growing at the rate of 30-40 per cent per annum.6 It is expected that the demand for

transport and logistics will continue to grow as the Indian economy is on a high growth

trajectory, the domestic market is unsaturated and the country needs investment in

transport infrastructure. The overall logistics market is estimated to reach a size of

over $125 billion (€88.65 billion) by the end of 2010.7

Table 2.1: cumulative fdi inflows in the Transport sector: april 2000 – april 2010

s. No. sector

amount of fdi inflows (in billion) per cent share in

india’s Total fdi inflows(in €) (in $)

1. Construction Activities 5.77 8.14 7.19

2. Automobile Industry 3.27 4.61 4.16

3. Ports 1.15 1.62 1.33

4. Sea transport 0.49 0.69 0.63

5. Air transport (including Air Freight) 0.17 0.24 0.21

6. Earth-moving machinery 0.09 0.13 0.11

7. Railways-related components 0.08 0.11 0.10

Total inflows 11.03 15.55 13.73

india’s Total fdi inflows 79.77 112.47

Source: DIPP Fact Sheet on FDI - From August 1991 to April 2010. Government of India, http://dipp.nic.in/fdi_statistics/india_FDI_April2010.pdf

Note: Figures are calculated using the average exchange rate for fiscal year 2009-10: $1 = Є0.7092. Source: www.oanda.com

4 CSO Statistical Abstracts (2009); CII-KPMG (2007); ADB (2007).

5 This figure is calculated using the average exchange rate for the fiscal year 2009-10: $1 = €0.7092. Source: www.oanda.com

6 Colliers International (2009).

7 CII-KPMG (2007). This figure is calculated using the average exchange rate for fiscal year 2009-10: $1 = €0.7092. Source: www.oanda.com


8 TRANSPORT AND LOGISTICS SERvICES IN INDIA: AN OvERvIEw

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http://www.oanda.com



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For domestic transportation, road transport is the dominant mode of transport accounting

for over two-third of the contribution of the transport sector to the GDP. Around 90 per

cent of India’s international trade is through maritime transport, most of the remainder

is through air transport, and less than one per cent is through roads and railways with

neighbouring South Asian Association for Regional Cooperation (SAARC) countries like

Bangladesh, Nepal, Bhutan and Pakistan with whom India shares land borders.

Over the years, the transport industry has been undergoing structural changes and

modernisation. Bulk cargo has been replaced by containerised cargo and multimodal

transportation has developed. Companies now provide integrated logistics services

and the use of Electronic Data Interchange (EDI) and Information Technology (IT)

has improved the operational efficiency of this sector. There has been a decline in

obsolete assets, and improvements in the self-financing capacity of the sector and

commercial management of transport assets and operations. Use of sophisticated

technology requires integrated service providers and skilled personnel, which can

provide services across the value chain. The fragmented market in certain segments

such as trucking is gradually becoming consolidated.

With the development of the logistics industry and just-in-time delivery, the share

of traffic by different modes of transport has changed. The share of road transport

for both passenger and freight traffic has increased, while that of the railways has

decreased.8

Liberalisation in the 1990s brought changes in the transport policy. From being a social

sector, transport is now treated as an economic sector which can facilitate growth

and alleviate poverty. The government’s role gradually changed from a direct provider

to a facilitator. The government has taken various measures to encourage private

participation, including innovative public-private partnership (PPP) models, and allowing

the private sector to charge users and avail of tax concessions. The government

is also taking measures to streamline customs and excise procedures, implement

EDI systems and liberalise the regulatory regime to facilitate private investment. As

a result of these measures, private/foreign participation in the Indian transport and

logistics sector has increased. However, the government is still a major investor in

this sector, especially in transport infrastructure. For instance, in the Eleventh Five-

Year Plan (2007-12), total investment in transport and logistics sectors9 is projected

8 The share of road transport increased from 50 per cent of freight traffic and 80 per cent of passenger traffic in 1990-91 to 65 per cent of freight traffic and 85 per cent of passenger traffic, respectively, by the end of 2006-07.

9 It includes roads and bridges, railways (including metro rail), ports, airports and storage.



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to be 2.5 times than the anticipated investment in the Tenth Plan. The public-private

investment ratio under the current Plan is projected at 70:30, as against a ratio of 80:20

in the previous Plan period, amounting to approximately $54 billion (€38.3 billion)10

investment by private players in these sectors.11 In the Annual Budget of 2009-10, the

allocation by the central government for the transport sector was approximately 19

per cent of the plan outlay. Figure 2.1 shows the rate of growth of capital formation in

the Indian transport sector.

figure 2.1: investment growth rates (at constant 1999-00 prices)

2003-04 2004-05

Year

50

40

30

20

10

0

-10

-20

gro

wth

rat

e

2006-07 2007-082005-06

Railways Transport by other means

Source: Based on Economic Survey of India (2008-09), p. 8, Table 1.6.

In a developing country like India, transport is treated as a ‘public good’ and one of

the key roles of the government is to ensure that the services are made available to

all consumers at affordable prices. For this, the Indian government has adopted a

cautious approach to privatisation/liberalisation and reforms have been undertaken in

a phased manner. At present, the bulk of the sector is open for FDI. The FDI policy is

given in Table 2.2.

10 This figure is calculated using the average exchange rate for fiscal year 2009-10: $1=€0.7092. Source: www.oanda.com

11 Planning Commission (2008a).



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Table 2.2: fdi policy in india: Transport and Logistics

sector fdi policy

Road Transport 100 per cent FDI is allowed through the automatic route.

Air Transport (Airlines) �� 49 per cent FDI is allowed in domestic airlines through the automatic route, subject to no direct or indirect equity participation by foreign airlines.

�� Foreign airlines are not allowed to participate directly/ indirectly in the equity of an Air Service Undertaking engaged in operating scheduled, non-scheduled and chartered airlines.

�� FDI up to 74 per cent and investment by Non-Resident Indians (NRIs) up to 100 per cent is allowed in non-scheduled airlines, chartered and cargo airlines through the automatic route. Foreign airlines are allowed to participate in the equity of companies operating cargo airlines.

�� FDI up to 74 per cent and investment by NRIs up to 100 per cent is allowed through the automatic route in ground handling services.

�� 100 per cent FDI is allowed for maintenance and repair organisations.

�� Helicopter services/seaplane services requiring Director General of Civil Aviation (DGCA) approval- FDI up to 100 per cent is allowed through the automatic route.

�� FDI up to 74 per cent is permitted through automatic approvals in existing airports. FIPB approval is required for FDI beyond 74 per cent. 100 per cent FDI allowed for Greenfield projects.

Railways Public monopoly; FDI is not allowed in passenger and freight transportation and pushing and towing services. It is allowed in maintenance and repair of rail transport equipment and supporting services and railway-related components, warehousing, and freight corridors.

Services Auxiliary to all Modes of Transport

100 per cent FDI is allowed through the automatic route in cargo-handling services, storage and warehousing services and freight forwarding services.

Courier and express services (only for carrying packages, parcels and other items which do not come within the ambit of the Indian Post Office Act, 1898)

100 per cent FDI is allowed through the FIPB route subject to existing laws and exclusion of activity relating to distribution of letters, which is exclusively reserved for the state.

Source: Compiled by authors from Manual on FDI. http://dipp.nic.in/manual/FDI_Manual_text_Latest.pdf and http://www.investmentcommission.in/sector.htm

Note: (a) FDI through the automatic route implies that it does not require prior approval either by the Government of India or the Reserve Bank of India (RBI); (b) Foreign Investment Promotion Board (FIPB) is under the jurisdiction of the Indian Ministry of Finance.



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India has a quasi-federal governance structure – the central, state and local

governments have distinct responsibilities and all of them regulate the transport and

logistics sector. The division of power and responsibilities is outlined in the Indian

Constitution and certain sectors are under the jurisdiction of the central government,

while others are under the jurisdiction of the state government. There are also certain

areas of joint jurisdiction. This has resulted in multi-layered administration systems

and multiple regulations. The central government is responsible for railways, national

highways, major ports, international shipping, civil aviation, and inland waterways.

State governments are responsible for state and rural roads, minor ports and coastal

shipping, inland water transport, urban transport and trucking, inter-city bus services,

etc. In areas such as rural roads, the state governments work closely with the local/

municipal bodies and the central government. Local municipal bodies are responsible

for urban planning and infrastructure. They also sometimes regulate traffic such as

truck entry timings within city limits. The key ministries and departments of the central,

state and local government and regulations relevant for the transport and logistics

sector are given in Table A.1 of Appendix A. The table shows that apart from transport

ministries and departments, a number of other ministries such as the Ministry of

Finance, the Ministry of Environment and Forests and the Ministry of Consumer

Affairs, Food and Public Distribution (which regulates inter-state movement of goods)

regulate this sector directly or indirectly.

Recent changes and developments in different segments of transport logistics are

discussed below:

2.1 road Transport

India has the second largest road network in the world (after the US). The network

increased from around 2 million kilometres in 1990-91 to over 3.3 million kilometres

in 2008-09. Traffic on Indian roads is growing at the rate of 7-10 per cent per annum,

while the vehicle population is growing at 12 per cent per annum.

India is a manufacturing hub for automobile and auto-component companies. The

figures for compound annual growth rate (CAGR) in different segments of automobile

production between 2002-03 and 2008-09 are given in Table 2.1.1.



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Table 2.1.1: automobile production Trends (Number of Vehicles)

category 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09cagr (in %)

Passenger Vehicles 723,330 989,560 1,209,876 1,309,300 1,545,223 1,777,583 1,838,697 16.82

Commercial Vehicles 203,697 275,040 353,703 391,083 519,982 549,006 417,126 12.69

Three- Wheelers 276,719 356,223 374,445 434,423 556,126 500,660 501,030 10.40

Two- Wheelers 5,076,221 5,622,741 6,529,829 7,608,697 8,466,666 8,026,681 8,418,626 8.80

Grand Total 6,279,967 7,243,564 8,467,853 9,743,503 11,087,997 10,853,930 11,175,479 10.08

Source: SIAM, http://www.siamindia.com/scripts/production-trend.aspx

Road is the main mode of domestic transport and carries about 65 per cent of freight

and 85 per cent of passenger traffic in India.12 However, road infrastructure is not well-

developed. The national highways/expressways which connect different states constitute

around 65,569 kilometres or 2 per cent of the road network and carry 40 per cent of the

road traffic; state highways have a network of 1,30,000 kilometres; and rural, district

and urban roads are 3.14 million kilometres in length.13 However, the national highways

are often congested. On average, a commercial vehicle in India runs at a speed of 32

kilometres (20 miles) per hour compared to over 97 kilometres (60 miles) per hour in

the mature logistics markets of Western Europe and the US.14 Moreover, many national

highways are two-lane and are not properly linked to major economic centres.

To enhance the capacity of the national highways, the National Highway Act, 1956

was amended in 1995 to encourage private participation. In 1998-99 the government

launched the National Highway Development Project (NHDP) which comprised 5,846

kilometres (3632.53 miles) of Golden Quadrilateral (GQ) connecting four metro cities,

7,300 kilometres of North-South and East-West corridors, 1,133 kilometres of port

connectivity and other projects at an investment of $12 billion (€8.51 billion).15 Innovative

methods of financing through Build, Operate and Transfer (BOT), annuity-based BOT and

Special Purpose Vehicles (SPV) were adopted to attract the private sector. The FDI regime

was liberalised to attract foreign investment and FDI up to 100 per cent is now allowed

through the automatic route in all road development projects including construction and

12 http://morth.nic.in/writereaddata/sublinkimages/overview_NH3244795788.htm

13 http://www.investmentcommission.in/roads.htm and the Department of Road Transport and Highways Annual Report (2007-08).

14 Data Monitor (2007).

15 This figure was calculated using the average exchange rate for fiscal year 2009-10: $1=€0.7092. Source: www.oanda.com



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maintenance of roads, highways, bridges and tunnels; all sub-sectors of road transport,

namely, passenger, freight, rental of commercial vehicles with operators, maintenance

and repair of road transport equipment and supporting services; and all sub-sectors of

services auxiliary to all modes of transport, i.e., cargo handling services, storage and

warehousing, freight transport agency and other services. The private sector has been

allowed to collect user charges, and they have been given incentives in the form of

100 per cent income tax exemption for a period of 10 years, cheaper loans, duty-free

import of road building equipment and machinery, and permission to develop rest areas

along roads entrusted to them, among others. To meet the funding requirements for all

categories of roads, the government created a Central Road Fund and levied cess on

petrol and high-speed diesel. Fifty per cent of this duty is allocated to rural roads and the

remainder is given to national highways and other roads.

With private and foreign investments, the total length of national highways increased

from 16,200 kilometres in the early 1990s to 70,548 km in 2009-10. However, private

investment has been largely concentrated in national highways, while the government

has focused on rural road development. In the Eleventh Five-Year Plan (2007-12),

the government aims to consolidate the existing road network and integrate state

highways and district roads with rural roads. In more recent years, road development

projects have gained momentum; the Ministry of Road Transport and Highways

(MORTH) has announced plans to build 12-13 kilometres of road network each day

in the fiscal year 2010-11.16 Allocation for the road transport sector increased by over

13 per cent, from approximately Rs. 1,75,200 million (€2,628 million) in Union Budget

2009-10 to Rs. 1,98,940 million (€2,984 million) in the Budget of 2010-11.17

Road freight transport has seen significant growth in recent years, but this sector is still

highly fragmented – only 15 per cent of the logistics service providers operate in the

corporate sector. Transporters with fleets of fewer than five trucks account for over

two-third of the owned and operated trucks, and 80 per cent of the total revenue.18

Small truck operators have been mainly engaged in haulage and depend on a large

number of intermediaries (brokers, booking agents, etc.). With liberalisation, the sector

is becoming corporatised and the market is becoming consolidated. Individual truckers

are being replaced by integrated logistics providers. A number of foreign players

16 http://www.livemint.com/2010/04/26145432/India-long-way-off-from-20km.html

17 The Union Budget of India 2010-11, Speech by the Minister of Finance (February 26, 2010), http://indiabudget.nic.in/ub2010-11/bs/speecha.htm. This figure was calculated using the average exchange rate for fiscal year 2009-10: Re.1 = €0.015. Source: www.oanda.com

18 Data Monitor (2007).



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including DHL19 (Germany), Kühne & Nagel International AG (Switzerland) and Thomas

Nationwide Transport (TNT) N.V (Netherlands) operate in the road freight segment.

These integrated logistics providers have reduced the need for intermediaries and the

skills of the workforce are improving. Better road conditions have also facilitated the

use of multi-axle vehicles which are gradually replacing single-axle vehicles/trucks.

In India, public transport has not been able to keep pace with the growing population

and demand. The share of buses in total registered vehicles declined from 11.1 per

cent in 1951 to 1.1 per cent in 2004.20 In the past, the government was the main

provider of public transport, but with liberalisation, passenger transport is no longer

a government monopoly. Since public transport is not adequate, personal transport,

especially two-wheelers and small cars, have become an important mode of transport.

India is the second fastest growing automobile market after China. The contribution of

the automotive industry to GDP increased from 2.8 per cent in 1992-93 to 5 per cent in

2006-07. The Indian automobile market is dominated by small-sized cars. At present,

the market for luxury cars is small - only one per cent of the Indian population can afford

luxury cars. With sustained growth in GDP and rising incomes, the market for luxury

cars is expected to grow. Many Indian corporate companies and foreign players have

entered the automobile and auto-component manufacturing segment. FDI up to 100

per cent is allowed in the automobile and auto-component manufacturing sector and

India has emerged as a major exporting country for auto- components. International

companies such as Ford Motor Company (USA), General Motors Company (USA) and

Volkswagen AG (Germany) have established manufacturing bases in India because of

conducive policies and the availability of cheap labour.

Due to increases in energy prices and the shortage of fossil fuels, the Indian government

(both at the centre and state levels) is now focusing on environment-friendly public

transportation modes like metro rail and fuel-efficient vehicles.

Overall, road development has been recognised as a key infrastructure sector for

sustaining India’s economic growth. It is estimated that with the growth of the

population and economic development, both road freight and passenger volumes will

grow. The road freight industry will grow at a CAGR of 9.9 per cent from 2007-08 to

2011-12,21 while passenger traffic is projected to grow at 12-15 per cent per annum.22

19 DHL is named after its founders –Adrian Dalsey, Larry Hillblom and Robert Lynn of Germany.

20 National Highways Builders Federation (NHBF), http://nhbf.in/national_road_polocy.htm

21 Information provided by the Planning Commission.

22 http://www.investmentcommission.in/roads.htm



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Investment in the road sector is expected to grow at 19 per cent per annum and

the government plans to spend about $10 billion (€7.09 billion) per annum on road

development over the next five years.23

2.2 railways

Indian Railways (spanning a length of 81,511 route kilometres) is the world’s fourth

largest rail network and the second largest in Asia. It is also the world’s fourth largest

freight carrier. It accounts for about 1.2 per cent of GDP and employed about 1.4

million people directly and 0.7 million indirectly (through support services) in 2006-07.

It is the principal mode of transport for inland bulk cargo and long-distance passenger

traffic. It carries more than 13 million passengers and 1.25 million tonnes of freight

every day.24 In 2008, there were over 7,000 railway stations in India.

The railways are one of the few sectors in India in which the government still has a

monopoly. With liberalisation, the demand for value-added transport services increased

and it was realised that the railways face capacity constraints in high-density corridors

and suffer from monopoly-induced inefficiencies and a maintenance backlog. Another

problem area identified was that the freight rates subsidise passenger transport. This

has led to a shift in freight traffic from rail to road transport over the years. There has

also been a shift in passenger traffic from the railways to airlines, especially to no-frill

private airlines. To reduce inefficiencies, the railways took various measures in the

1990s and in early 2000 to re-balance tariffs and involve the private sector in non-core

activities. However, the sector continued to be supported by budgetary grants and

suffered operational losses.

In 2005-06, the Ministry of Railways formulated an integrated modernisation plan

for 2005–2006 to 2009–2010, to upgrade operations (both passenger and freight

services) to global standards. The total expenditure was estimated to be $5.5 billion

(€3.9 billion).25 Private players were allowed to participate through the PPP route in

operating container trains on designated routes and developing rail-side warehouses,

logistics parks, budget hotels, etc. They can now participate in strengthening rail-port

connectivity, and developing dedicated freight corridors. Non-core activities such as

23 This was pointed out by the Investment Commission of India.

24 http://www.asiatradehub.com/India/railways.asp and http://www.indianrailways.gov.in/evolution/ rail-network.htm

25 This figure was calculated using the average exchange rate for fiscal year 2009-10: $1=€0.7092. Source: www.oanda.com



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product manufacturing have been opened up for FDI and corporate management

practices have been introduced. After the adoption of these measures, the Indian

Railways started recording impressive rates of growth. In the past four years, the

railways generated a cumulative cash surplus before dividend of approximately $16.94

billion (€12.01 billion).26 The operating ratio of the railways, which was 83.72 per cent

in 2005-06, came down to 75.94 per cent in 2007-0827 and is expected to drop further.

The Indian Railways is also a major equipment manufacturer. It meets most of the

requirements through domestic production in factories like Chittaranjan Locomotive

Works (Chittaranjan, West Bengal) and Diesel-Loco Modernisation Works (Patiala,

Punjab). The Ministry of Railways is focused on developing its industrial capacity to

meet most of the country’s locomotive, passenger-car and ancillary equipment needs

domestically and to export locomotives to other countries. The total value of exports

of rolling stock/ spares during 2008-09 was Rs. 1,501.5 million (€22.52 million).28

In recent years, there has been an increase in freight and passenger traffic due to

improved service quality and increases in route length. Also, unlike road transport,

the railways are not subjected to inter-state border checks that are time-consuming.

In 1990-91, freight traffic was around 3.3 billion tonnes which increased to 7.9 million

tonnes in 2007-08. In future, private investment in this sector is likely to increase due

to PPP initiatives. The government has already signed agreements with companies

from countries such as Japan, Russia, Germany and France for high-speed passenger

corridors, and manufacturing and consultancy services. The Indian Railways is also

setting up two Greenfield electric and diesel locomotive factories in joint ventures

with foreign manufacturers. Although private participation in the sector is increasing,

Indian Railways is unlikely to be privatised in the near future.

2.3 air Transport

Air transport is the fastest mode of transport for long-distance passengers and

high-value cargo. Post-liberalisation, with the development of services (financial,

telecommunications, IT, etc.) and growth in exports in sectors such as gems and

26 This figure was calculated using the average exchange rate for fiscal year 2009-10: $1 = €0.7092. Source: www.oanda.com

27 http://www.ibef.org/Archives/ViewArticles.aspx?art_id=17585&cat_id=808 and Indian Railways (2008)

28 This figure is calculated using the average exchange rate for fiscal year 2008-09: Re. 1 = €0.015. Source: www.oanda.com. Exports included new Cape Gauge diesel locomotives, lease-cum-maintenance of YDM4 diesel locomotives, new MG coaches/chair cars (non-AC), diesel loco spares, and MG diesel locomotive axles to developing countries such as Angola, Sudan, Mozambique, Senegal, Tanzania, Malaysia and Sri Lanka.



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jewellery and pharmaceuticals, this sector has witnessed a rapid rate of growth.

According to the International Air Transport Association (IATA), India has one of the

fastest growing aviation industries and the country’s rank in the world’s aviation market

rose from 12 in 2006 to 9 in 2008. The market grew at a CAGR of 18 per cent and

was worth approximately $5.6 billion (€3.94 billion)29 in 2008. Indian carriers currently

have a fleet size of 310 aircraft.30 Passenger traffic (both domestic and international)

almost doubled between 2004 and 2007, while cargo traffic increased by 33.8 per

cent between 2004-05 and 2007-08.31

The air transport sector has been liberalised in a phased manner. In 1994, the

government monopoly in airline operations ended and private players were allowed

to enter the market. In 2007, private operators catered to nearly 82 per cent of the

market. In 2009, the proportion of passenger and freight carried by national and private

carriers was in the ratio of 1:4 and 1:2, respectively, for domestic operations and 4:1

and 2:1 for international operations.

Competition among private operators brought down prices and no-frill airlines have made

air travel affordable for a large number of people. The number of domestic passengers

using private air services (both scheduled and non-scheduled) increased from 15 million

in 1990 to 35.16 million in 2006-07.32 Important policy changes include an open sky

policy for cargo and Indian private airlines are allowed to fly on designated international

routes. There are still, however, some FDI restrictions on ownership by foreign airlines.

With the growth in demand, airports have started facing capacity constraints and the

government is now encouraging private investment in development and maintenance

of airports. For Greenfield airports, up to 100 per cent FDI is allowed through the

automatic route, while for other airports clearances are required for FDI beyond

74 per cent. FDI up to 100 per cent is allowed in ground handling services (74 per

cent through the automatic route), maintenance and repairs, and flying training and

technical training institutes. Private developers are allowed to set up captive airstrips

and general airports 150 kilometres away from an existing airport, and they can avail

100 per cent tax exemption for airport projects for a period of 10 years. There are no

caps on investment in maintenance and repairs, flying training institutes and technical

training institutes; and helicopter/seaplane services.


30 http://www.ibef.org/industry/aviation.aspx

31 Figures taken from the Airport Authority of India, http://www.airportsindia.org.in/AAI/main.jsp

32 http://indiabudget.nic.in/es2000-01/chap99.pdf; www.indiastat.com



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http://www.airportsindia.org.in/AAI/main.jsp

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http://www.indiastat.com

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With the privatisation of airports, the need for regulatory changes has been felt. The

government enacted the Airports Economic Regulatory Authority of India Act, 2008 that

established a regulatory authority called the Airports Economic Regulatory Authority of

India (AERA) in May 2009.33 The objectives of AERA are to foster healthy competition

among all major airports (government-owned, PPP-based, and private);34 encourage

investment in the sector; regulate tariffs of aeronautical services; protect reasonable

interests of users; and operate efficient, economic and viable airports. As a transparent

entity, AERA published its “White Paper on Regulatory Objectives and Philosophy in

Economic Regulation of Airports and Air Navigation Services” in December 2009, listing

major issues that impact the formulation of its regulatory philosophy.

The Indian air transport sector will continue to grow at a rapid pace. The Vision

2020 statement announced by the Ministry of Civil Aviation projected investment

opportunities of approximately $110 billion (€78.01 billion)35 in the Indian civil aviation

sector ($80 billion or €56.5 billion in new aircraft and $30 billion or €21.5 billion in the

development of airport infrastructure); air cargo traffic will grow at over 11.4 per cent

per annum and exceed 2.8 million tonnes by end-2010.36

2.4 Maritime Transport

India is strategically located in the global shipping routes and has a long coastline

which makes it an important maritime nation. Maritime transport caters to over 90 per

cent of the country’s trade in terms of volume and 70 per cent in terms of value. India

has 13 major ports which are regulated by the central government and 187 minor ports

which are under the jurisdiction of state governments. Major ports handle over three-

fourth of the sea-borne traffic. The quantity of cargo handled and container traffic in the

major ports increased from 152.6 million tonnes and 7.9 million tonnes, respectively,

in 1990-91 to 519.1 million tonnes and 92.13 million tonnes, respectively, in 2007-08.37

India’s shipping industry is ranked 17th among the world’s maritime nations in terms

of Gross Tonnage (GT) and 15th in terms of Dead Weight Tonnage (DWT).38 It has the

33 Ministry of Civil Aviation (2009).

34 Major airports have been defined under the Act as follows: “Major airport means an airport which has, or is designated to have annual passenger throughput in excess of one and a half million or any other airport as the Central Government may, by notification, specify as such.”

35 This figure was calculated using the average exchange rate for the fiscal year 2009-10: $1 = €0.7092. Source: www.oanda.com

36 Mukherjee (2009) and http://www.ibef.org/artdispview.aspx?cat_id=503&art_id=21353&in=5

37 http://indiabudget.nic.in/es1990-91/4%20Infrastructure.pdf

38 http://pib.nic.in/archieve/image/2005/r2005111704.pdf and http://www.imaritime.com/knowledge-center/shipping.php



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http://pib.nic.in/archieve/image/2005/r2005111704.pdf

http://www.imaritime.com/knowledge-center/shipping.php

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largest merchant shipping fleet among the developing countries; the fleet consisted

of 912 ships of 9.3 million GT in 2008.39 However, coastal shipping and inland water

transport is limited. Apart from ports and shipping, the maritime sector also consists

of other facilities such as shipbuilding, ship repair and maintenance, and training of

seafarers. India is a global supplier of seafarers and accounts for around 6 per cent of

the total seafarers in the world.40

With the increase in trade after liberalisation, it became necessary to enhance

port capacities. FDI up to 100 per cent is now allowed in port development projects

(construction and maintenance). The private sector has been offered other incentives such

as 100 per cent income tax exemption for port development for a period of 10 years. As a

result, several global port operators have established operations in India through BOT and

other modes. These include the Maersk Line Group in the Jawaharlal Nehru Port Trust

(JNPT), Mumbai; P & O Ports in JNPT, Mumbai and Chennai; Dubai Ports International

in Cochin and Visakhapatnam; and PSA Singapore in Tuticorin. In the shipping sector,

foreign ships calling at Indian ports no longer require a licence for overseas trade; the

cargo reservation policy has been relaxed to allow foreign vessels on a case-by-case

basis. This has increased the share of foreign shipping in total trade. Foreign shipping

companies now control most of the container traffic and the share of Indian shipping in

international trade declined from 36.7 per cent in 1991-92 to 13.7 per cent in 2005-06.41

Despite these developments, government policy is geared towards promoting national

shipping for strategic reasons and self-reliance. For instance, the government introduced

the Tonnage Tax42 in 2004, which boosted the growth of the Indian merchant fleet.

It has been estimated that the cargo-handling capacity of Indian ports will increase to

1,855 MT by 2012 with an investment of about $20.61 billion or €14.62 billion; over

60 per cent of this will be from the private sector.43 The Indian ship-building industry

accounts for 1.7 per cent of the global ship-building market. The share is expected to

increase to 15 per cent by 2020 and this industry is expected to grow at a CAGR of 30

per cent to reach $22 billion (€15.6 billion) in 2020.44

39 This comprises around 282 overseas vessels with 7.89 million GT and 13.55 million DWT and 590 coastal vessels with 0.5 million GT and 0.99 million DWT.

Source: http://www.thehindubusinessline.com/2009/01/27/stories/2009012750181000.htm

40 CII-KPMG (2007), Gaps in the Indian Logistics Sector: A White Paper, September 2007.

41 In fact, while the world cargo fleet grew from 464.99 million GT in 1995 to 687.98 million GT in 2006, India was still witnessing slow growth in its fleet size during this period. Source: Planning Commission (2008b).

42 Under this system, ship-owners can opt for tonnage tax, whereby income tax is levied on the basis of presumptive income of the Net Tonnage (NT) of each ship owned by Indian ship-owners determined according to a fixed scale.


44 http://www.thehindubusinessline.com/2008/03/24/stories/2008032450570600.htm. This figure was calculated using the average exchange rate for fiscal year 2009-10: $1 = €0.7092. Source: www.oanda.com



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2.5 auxiliary and Logistics services

The term ‘logistics services’ is defined as the management of goods and resources

between the ‘point of origin’ and the ‘point of consumption’, so as to meet customer

requirements. Thus, transportation is a key component of logistics services. Such

services help to integrate different modes of transport. It also includes other services

such as storage and warehousing, inventory management, and packaging. The logistics

sector started modernising and globalising after India began integrating into the global

value chain. Indian industries such as automobiles and auto-components, IT hardware,

electronics, textiles, Fast Moving Consumer Goods (FMCG) and retail are some

main users of logistics services. Most Indian companies now concentrate on their

core businesses and have outsourced the non-core business to specialised logistics

service providers. The Indian Third Party Logistics (3PL) service providers’ market was

estimated at about $890.3 million (€631.42 million) in 2005 and is expected to grow

at a CAGR of 21.9 per cent to reach around $3,557 million (€2523 million) in 2012.45

Although the current size of the Fourth Party Logistics (4PL) service providers’ market

is small, it is expected to grow at a rate of over 20 per cent in the next five years.

The total warehousing space in India was estimated to be 1,800 million sq ft in

2006.46 A large part of the warehousing business is in the unorganised sector and

organised players accounted for only 8 per cent of the segment in 2006.47 Among

the organised players, public sector enterprises such as the Central Warehousing

Corporation (CWC) and Food Corporation of India (FCI) have the majority share. The

government is encouraging foreign investment in warehousing and FDI up to 100 per

cent is allowed. In recent years, a large number of Indian companies such as the Tata

Group and foreign players such as the Maersk Logistics Group (Denmark), ProLogis

(USA) and Jebel Ali Free Zone (Jafza) International (Dubai) have entered the storage

and warehousing business. The need for warehousing and storage is likely to grow as

the Indian economy is growing and businesses are integrating into global value chains.

It is estimated that the Indian warehousing sector will grow from $20 billion (€14.18

billion) in 2007-08 to about $55 billion (€39.01 billion) by 2010-11, growing at a rate of

35-40 per cent every year.48

45 http://www.frost.com/prod/servlet/market-insight-top.pag?docid=74102578. This figure was calculated using the average exchange rate for fiscal year 2009-10: $1 = €0.7092. Source: www.oanda.com

46 CII-KPMG (2007).

47 The main reason is India’s indirect tax structure. Since taxes paid on cross-border sales are higher than local tax charges, most companies prefer to set up small warehouses across different states rather than large centralised set-ups.

48 Colliers International (2009). The figures were calculated using the average exchange rate for fiscal year 2009-10: $1 = €0.7092. Source: www.oanda.com



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With increased containerisation, the demand for container-handling services in India is

growing. In 2009, India had 133 container freight stations and inland container depots, the

majority of which are privately owned. The Planning Commission of India has projected

that these facilities should double in the next two years to support the growth in container

traffic. The different transport ministries such as the Ministry of Railways have taken

initiatives to develop container-handling facilities through private partnerships. In 2007,

the Indian Railways allowed private players in rail container transportation. By 2009, 16

companies including many private players have acquired licences to run container trains.

Due to such incentives, although India’s present container handling capacity is low, it

will grow at a rapid pace in the near future. For instance, Frost & Sullivan in the report,

“Strategic Assessment of Containerization Trends in India”, pointed out that India’s

container handling capacity for international and domestic traffic is expected to reach 21

million Twenty-foot Equivalent Units (TEU) in 2014 from 9.1 million TEU in 2008.

Customs brokers, Clearing and Forwarding (C&F) agents and freight forwarders

are some important players in the logistics chain. Some of them have integrated

operations and offer a wide variety of services to customers, while others provide

specialised services. In the past, the logistics chain in India was highly fragmented

with a large number of intermediaries. With the integration of the logistics chain, the

need for a large number of intermediaries is decreasing. Automated systems, on-line

documentation filing, etc., have also reduced the need for multiple agents.

Since Indian companies cater to global clients who demand time-bound high quality

services in product consumption, the segment of reverse logistics49 is growing. About

7 per cent of an enterprise’s gross sales are captured by return costs. This is a new

area of operations in India and most reverse logistics contracts are customised to fit

the size and type of companies that contract them.

2.6 express delivery and courier services

Express Delivery Services (EDS) facilitate the transportation of documents, samples,

gifts and other high-value time-bound items. EDS companies also handle customs

clearances and reduce the need for multiple agents such as freight forwarders and

customs clearance agents. Courier companies offer similar services but generally

49 The term ‘Reverse Logistics’ stands for all operations related to the resources getting at least one step back in the supply chain for the purpose of value addition, proper disposal or re-manufacturing. Mostly, it is seen as the flow of goods from the point of consumption to the point of origin and also involves planning and managing (collection, disassembly and processing) the efficient flow of and/or reuse of surplus inventory.



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the EDS companies provide more value-added services. Since the logistics chain in

India is fragmented and delivery time is high, Indian companies often use EDS/courier

services instead of general logistics services to save time. The growth of this industry

has been propelled by the development of India as a business process outsourcing

hub, the growth of services such as telecommunications and financial services, and

exports of products like auto-components and textiles.

At present, the size of the EDS industry is estimated at around Rs. 90 billion (€1.33

billion)50 and this sector is growing at around 20-25 per cent per annum.51 According

to industry estimates, the courier/EDS industry is expected to grow at around 30 per

cent in the next five years. There are more than 2,500 EDS/courier companies in

India that employ close to 1 million people either directly or indirectly; of these, only

20 or 30 companies belong to the organised/ corporate sector but they account for

70 per cent of the total revenue. Global integrators, namely, Federal Express (FedEx)

and United Parcel Service Inc. (UPS) from the USA, DP-DHL (Germany), and TNT N.V

(Netherlands) have a presence in India. They have expanded their domestic operations

through local partnerships. For instance, DHL has partnered with the Indian company,

Blue Dart, and also entered into partnership with India Post (i.e., the Department of

Posts of the Government of India) for international mail services.

Up to 100 per cent FDI is allowed in the courier/EDS business, but according to the

present regulations (i.e., Indian Post Office Act, 1898), ‘letters’ are reserved for India

Post. However, this act does not define the term ‘letter’ and the Department of Posts

is in the process of designing new regulations for this sector.

Overall, the transport and logistics sector in India has undergone significant changes

in the past 15 years. Private participation has increased and there have been mergers

and acquisitions and consolidation. With growing GDP and trade, India is an important

market for transport and logistics service providers, and several EU companies have

already established a presence in India. The next section discusses India-EU trade,

investment and collaboration in this sector.

50 This figure is calculated using the average exchange rate for fiscal year 2009-10: Re. 1 = €0.015. Source: www.oanda.com

51 Express Industry Council of India (EICI), http://www.eiciindia.org/FrontSite/aboutus.aspx



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3. india-eU Trade, investment and collaboration


25INDIA-Eu TRADE, INvESTmENT AND COLLABORATION

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India-EU trade, investment and collaboration in transport and logistics constitute trade

in goods, trade in services, investment by EU companies in India, joint ventures and

other forms of collaboration. This study does not address Indian investments in the

EU. Section 3.1 discusses trade in goods between India and the EU, using bilateral

trade flow data; it also shows the comparative positions of both India and the EU in

transport services. A primary survey was conducted to understand the pattern of trade

in goods and services, areas in which EU companies are investing in India, their views

on future growth potential, and factors determining their success in India. These are

discussed in Section 3.2.52 Section 3.3 discusses on-going and past collaborations

at the government-to-government level that have implications for enhancing trade

and collaboration between India and EU. Section 3.4 examines areas for future trade,

collaboration and investment.

3.1 Trade in goods and services and investment flows

3.1.1 Trade in goods

The EU is the largest player in global trade but more than half of this is intra-EU. In 2008,

the EU (extra-EU) contributed 15.9 per cent and 18.3 per cent in global merchandise

exports and imports, respectively. India’s ranking among WTO member countries has

also improved in the past few years, but its share remains low. In 2008, India ranked

19th among merchandise exporters (1.5 per cent share) and 10th among importers in

the world.53

The EU is India’s largest trading partner in goods. In the past few years, merchandise

trade between India and the EU has shown impressive growth. In 2008, the total trade

between India and the EU reached $79 billion (€55.63 billion) compared to only $19.7

billion (€17.43 billion) in 1998, and witnessed a CAGR of 14 per cent over the past 10

years. India has a negative trade balance with the EU.54

India’s trade in transport equipment includes import and export of different types of

vehicles, vehicle parts, aircraft and aircraft parts, cruise ships, and boats. Transport

52 The barriers faced by EU companies in India are discussed in Section 4.

53 WTO (2009)

54 Balance of Payments, IMF. This figure was calculated using the average exchange rate for fiscal year 2008–09 ($1 = €0.7042) and 1998–99 ($1 = €0.8849). (Source: http://www.oanda.com/)


26 INDIA-Eu TRADE, INvESTmENT AND COLLABORATION

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equipment holds an important place in India’s trade basket and India’s global trade in

this sector was €19 billion in 2007-08, of which exports accounted for €4.9 billion. India

is a major importer of transport equipment and the EU is one of the largest suppliers of

transport equipment to India (Figure 3.1.1.1). India also exports transport equipment

to the EU.

figure 3.1.1.1: india’s Major supplier countries and export destinations for

Transportation equipment (2007-08)

EU | 20.8%Others | 35.8%Singapore | 10.2%

UAE | 8%

USA | 9.7%Bangladesh | 2%

Egypt | 2.7%

Algeria | 2.1%

South Africa | 3.4%Sri Lanka | 5.3%

export destinations of indiasupplier countries to india

Japan | 3.1%

China | 3.7%

Others | 10.2% EU | 35.5%

Singapore | 4.2%

USA | 43.3%

Source: Authors’ calculations from Export-Import Databank, Director General of Foreign Trade (DGFT), Government of India.

Over time, India-EU trade in transportation equipment has increased. As in the

case of total merchandise trade, India has a negative trade balance with the EU in

transportation equipment. Figure 3.1.1.2 shows an increase in trade in 2005-06. This

is due to an increase in imports of aeroplane and other aircraft (the HS codes for

transportation equipment at the 6-digit level are given in Table B.1 of Appendix B). In

2007-08, transportation equipment was the 8th largest commodity in India’s export

basket to the EU, accounting for 4.2 per cent of total exports. It was the second

largest commodity in imports from the EU, with a share of 5.8 per cent. In 2008, India

was the 15th largest trading partner for the EU in this sector, accounting for 1.6 per

cent of the total EU trade in transportation equipment.55 This clearly shows that while

India is a major importer of transport equipment and imports from the EU are rising,

there is scope for further increase in trade between India and the EU.

55 http://exporthelp.europa.eu



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figure 3.1.1.2: india-eU Trade in Transportation equipment

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

1997-98 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 (Apr- Dec)

Valu

e in

€B

illio

ns

Years

0.390.56

0.27 0.33 0.250.42 0.29

0.55 0.60 0.63

1.01

3.13 3.04

4.29

1.25

0.79 0.761.02

1.61

0.68

Exports Imports

Source: Authors’ calculations from Export-Import Databank, DGFT, Government of India.

Note: Exchange rates are as follows: For 1997, Є1 = Rs.20.9613; for 2000, Rupee 1 = Є0.0241; for 2001, Rupee 1 = Є0.0237; for 2002, Rupee 1 = Є0.0207; for 2003, Rupee 1 = Є0.0185; for 2004, Rupee 1 = Є0.0176; for 2005, Rupee 1 = Є0.0185; for 2006, Rupee 1 = Є0.0172; for 2007, Rupee 1 = Є0.0175; for 2008 (Apr–Dec), Rupee 1 = Є0.0153. (Source: RBI and Foreign Exchange Dealers’ Association of India, http://www.fedai.org.in/)

The top 10 items of India’s exports and imports to and from the EU are given in Table

B.2 and Table B.3 in Appendix B. The two tables show that the major export items

constitute vehicles parts and accessories, while imports largely constitute aeroplanes

and other aircraft. There has been a change in both the import and export baskets over

time. India’s major export destinations and the major EU member countries exporting

to India in 2007-08 are given in Figure 3.1.1.3.

figure 3.1.1.3: indian exports to eU Member states and eU exports to india

in 2007-08

France | 65.3%

Germany | 12.7%

EU-19 | 5.7%

Italy | 1.6%

Czech Republic | 2.3%

Cyprus | 2.3%

Sweden | 2.9%

Netherlands | 3.1%

UK | 4.1%

eU’s exports to indiaindia’s exports to eU countries

Belgium | 4.3%EU-19 | 14.4% Italy | 23.6%

UK | 13.9%France | 12.1%

Germany | 14.3%

Spain | 6.2%

Greece | 4.5% Netherlands

| 6.7%

Source: Authors’ calculations from Export-Import Databank, DGFT, Government of India.



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The types of products exported by different EU member states are listed in Table 3.1.1.1.

Table 3.1.1.1: Leading eU countries exporting to india and products exported

eU countries Top 5 Transportation products

france

Aeroplanes & other aircraft, of an unladen weight >2000 kg but not excluding 15000 kg (880230)

Aeroplanes & other aircraft, of an unladen weight not exceeding 2000 kg (880220)

Aeroplanes & other aircraft, of an unladen weight exceeding 15000 kg (880240)

Other parts of aeroplanes/helicopters (880330)

Dredgers (890510)

germany

Aeroplanes & other aircraft, of an unladen weight >2000 kg but not excluding 15000 kg (880230)

Other parts & accessories of vehicles of heading 8701-8705 (870899)


Other motor cars & motor vehicles principally for the transport of persons, including station wagon etc (870390)

Vehicle with spark ignition internal combustion reciprocating piston engine of cylinder capacity>3000 cc (870324)

UK


Other vessels, fire floats etc (890590)

Other parts of goods of heading 8801 or 8802 (880390)

Other vessels for transport of goods & other vessels for transport of persons & goods (890190)

Cruise ships, excursion boats & similar vessels principally designed for transport of persons, ferry-boats of all kinds (890110)

Netherlands

Dredgers (890510)

Cruise ships, excursion boats & similar vessels principally designed for transport of persons, ferry-boats of all kinds (890110)


Tugs and pusher craft (890400)


sweden


Other parts & accessories of vehicles of heading 8701-8705 (870899)


Drive axles with differential w/n provided with other transmission components (870850)

Dumpers designed for off-highway use (870410)

Source: Compiled from Export-Import Databank, DGFT, Government of India. http://dgftcom.nic.in/



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3.1.2 Trade in services

The global services trade has seen significant growth in the past decade from $2.7

trillion (€2.3 trillion) in 1998 to $7.3 trillion (€5 trillion) in 2008.56 In 2008, the world’s

exports of services grew by 12 per cent over 2007. In 2008, the EU was the largest

exporter of services and accounted for around 46 per cent of global exports of services,

whereas India was the 5th largest exporter (Table 3.1.2.1).

Although both India and EU trade in transportation services, the EU has a much larger

share in global trade than India as shown in Table 3.1.2.1. This table also highlights the

relative position for construction services since a large part of this includes transport-

related construction. However, it should be noted that a substantial part of the EU’s

trade in transport and construction services is within EU member states.

Table 3.1.2.1: ranking of india and the eU in global services

(in US $ billion)

india eU extra-eUWorld Total

ValueShare (%) Rank Value

Share (%) Rank Value

Share (%) Rank Value

exports

Commercial Services (2008)

102.6 (70) 2.7 5th 1754

(1199) 46.4 1st 743.2 (508) 19.7 1st 3778

(2582)

Transportation Services (2008) 11.1 (8) 0.6 11th 402.7

(275) 45.2 1st 0.2 (0.1) 21.9 1st 890

(608)

Construction Services (2007)

0.8 (0.6) 1.3 9th 38.4

(28.1) 58.4 1st 21.7 (15.9) 32.9 1st 65.8

(48.1)

imports

Commercial Services (2008)

83.6 (57) 2.4 7th 1512.6

(1034) 43.4 1st 620.7 (424.2) 17.8 1st 3489

(2384)

Transportation Services (2008)

41.4 (28) 4.0 5th 363.6

(248) 34.8 1st 162.1 (110.8) 15.5 1st 1045

(714)

Construction Services (2007)

691 (505) 1.1 11th 26.0

(19) 41.2 1st 10.6 (7.7) 16.6 1st 63.2

(46.2)

Source: Compiled by the authors from WTO (2009), Table III.4 (p.123), Table III.17 (p.139), Table A8 (p.189-191) and Table A9 (p.192-194).

Note: Figures in parentheses are Euro (€) equivalents. These were calculated using the average exchange rate for the year 2008 ($1 = €0.6834) and for 2007 ($1 = €0.7308). Source: http://www.oanda.com/.

56 WTO (2009). This figure is calculated using the average exchange rate for the year 2008 ($1 = €0.7042) and for 1998 ($1 = €0.8539). Source: http://www.oanda.com/



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Trade in services is a growing component of EU-India bilateral trade. The EU is India’s

second largest trading partner in services (after the US). India-EU services trade

increased more than 3.6 times between 2003 and 2008 and reached €15.6 billion in

2008. India is a net exporter of services to the rest of the world, but it is a net importer

from the EU. In 2008, India had a trade deficit of €2.4 billion with the EU.

Table 3.1.2.1 shows that in the transportation and construction services sector, India

has a negative trade balance with the EU. In 2006, India’s exports of transportation

and construction services stood at €1.4 billion and €0.1 billion, respectively, whereas

imports were valued at €2.3 billion and €0.2 billion, respectively.

Table 3.1.2.2: india’s Trade in services with the eU in 2008

(in € billion)

services exports imports Trade Balance

Transportation 2.8 1.5 -1.1

Travel 0.9 1.9 0.9

Other Services 5.2 3.3 -2.3

Computer & IT 0.4 0.9 0.5

Communications 0.2 0.2 0.1

Construction 0.3 0.1 -0.2

Financial 0.3 0.1 -0.2

Other government services 0.3 0.1 -0.2

Insurance 0.1 0.0 -0.1

Royalties & licence fees 0.3 0.1 -0.2

Cultural & recreational 0.0 0.0 0.0

Other business services 3.0 2.2 -0.8

Source: Extracted from 4th Table, News release no. 157/2009 dated November 4, 2009. http://epp.eurostat.ec.europa.eu/portal/page/portal/publications/collections/news_releases.



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3.1.3 Bilateral investment flows between india and the eU

The EU is the second largest investor in India (after Mauritius), accounting for about

20 per cent of FDI inflows. Among EU member countries, the UK is a major investor

followed by the Netherlands, Cyprus, Germany and France. During the period January

2000 – November 2008, the transport sector ranked second among the service sectors

in which the EU invested in India.57 Segment-wise FDI inflows in this sector are given

in Table 3.1.3.1 below.

Table 3.1.3.1: fdi inflows from the eU: January 2000 – November 2008

s. No. sector

amount of fdi inflows(in millions)

percentage of Total fdi

inflows(in $) (in €)

1. Automobile industry 1,322.66 938.06 8.06

2. Ports 749.28 531.40 4.26

3. Construction activities 553.48 392.54 3.32

4. Sea transport 122.63 86.97 0.75

5. Air transport (including Air Freight) 70.33 49.88 0.43

6. Railway-related components 25.89 18.36 0.16

7. Earth-moving machinery 2.11 1.50 0.01

Total inflows 2,846.38 2,018.71 16.99

eU’s Total fdi in india 16,244.70 11,521.06 -

Source: DIPP sources.

Note: The figures were calculated using the average exchange rate for fiscal year 2009–10: $1 = €0.7092. Source: www.oanda.com

EU member countries are among the largest players in terms of technology transfer

approvals in India. The share of the transport sector in technology transfer approvals

between August 1991 and April 2009 was 9 per cent (Figure 3.1.3.1).

57 Between January 2000 and June 2007, the automobile industry (including passenger cars, etc.) was accounted as among the top five sectors attracting FDI inflows from the EU.



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figure 3.1.3.1: Total Technology Transfers approved by country and sector

(august 1991 - august 2009)

Electrical Equipments (including computer software and electronics) | 16%

Chemicals ( other than fertilizers) | 11%

Industrial Machinery | 11%

Transport Industry | 9%

Miscellaneous Machinery Engineering Industry | 5%

Other Sectors | 48%Other Countries | 35.82% USA | 22.62%

Germany | 13.82%

Japan | 10.89%U.K. | 10.82%

Italy | 6.03%

Source: Compiled from Sections III.B and III.C, DIPP (2009b).

3.2 The primary survey

Companies from EU member states have a presence in a wide range of transport

and logistics services. While some are into equipment manufacturing, others provide

construction, consultancy or maintenance services. Many companies are also in the

logistics and freight forwarding business. A primary survey was conducted in 2009 to

understand their modes of operation in India, their investment and competitors, future

growth prospects, and how they compare India vis-à-vis markets like China, The survey

covered EU companies in construction and consultancy, freight forwarding and logistics

services, and automobile and auto-component manufacture. The survey was based

on semi-structured questionnaires, and separate questionnaires were designed for

different types of companies. The survey also included in-depth interviews with Indian

government officials, industry associations and trade experts. It was administered in

six Indian cities, namely, Delhi and the National Capital Region, Mumbai, Bangalore,

Pune, Kolkata and Chennai. The sampling frame is given in Table 3.2.1.



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Table 3.2.1: sampling frame

respondent

segment

Total Number

Construction & Consultancy

Transport and Logistics service providers

(freight forwarders, express delivery services, customs clearing agents,

etc.)

Automobile/ component

manufacturing

Indian companies 2 55 3

EU-based and non-EU companies 8 36 11

Industry Associations/ Councils

1 10 5

Total 11 101 19 131

Indian government organisations/Ministries 16

Trade representatives and sector experts 5

grand Total 152

The survey found that several EU companies have a presence in India. The majority

initially entered the Indian market through joint ventures to gain local market

knowledge. Joint ventures also helped them in the bidding process and in getting

manpower and office space. Once established in India they gradually became wholly-

owned subsidiaries. This shows their long-term interests and commitment to the

Indian market.

Companies were asked about factors that determined their growth in India. The

answers varied depending on the type of the company, as shown in Table 3.2.2, but

all of them rated ‘steady growth in GDP’ as a key factor. ‘Technological development’

and ‘skilled workforce’ were given high importance by construction and manufacturing

companies, while logistics service providers emphasised ‘infrastructure development.’

In fact, while ‘lack of infrastructure’ or ‘poor quality of infrastructure’ is a major

impediment to the operations of logistics service providers, it acts as an opportunity

for construction companies to grow.



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Table 3.2.2: perception ranking of factors responsible for growth in india(in percentage)

factor

Logistics service providers

construction & consultancy

equipment/auto Manufacturers

Very Important Important



Globalisation 44 56 - - 70 20

FDI allowed in sector 44 56 - - - -

Steady growth in GDP 89 11 100 - 90 10

Infrastructure development 89 - 100 - 40 40

Central Govt. Policy 56 22 100 - 100 -

State Govt. Policy 22 22 33 33 60 40

Scope for upgrading to value-added services 11 56 - - - -

Transparency in bidding - - 66 33 - -

Technological development - - 100 - 100 -

Skilled workforce - - 100 - 90 10

Collaboration with Indian partner - - - 33 10 -

Machinery upgrading - - - - 100 -

Consumer demand - - - - 90 -

Source: Computed by the authors from the survey.

Note: Respondents were asked to rank the factors on a scale of 1–5, with 1 being “very important” and 2 “important”. If companies did not attach importance to a factor, the cell was left blank.

The survey found that Indian and EU companies have trade complementarities in the

transport and logistics sectors. The Indian companies have local market knowledge,

are more flexible in their operations and have lower costs. On the other hand, EU

companies have a wider global reach, better technology, higher standards, and can

invest more on R&D. However, the costs of operation of EU companies are high and

their knowledge of the local market is low. Due to high costs, they face competition

not only from Indian companies but from other countries like China. Partnerships with

Indian companies have helped them mitigate some of these disadvantages.

In the automobile and auto-component manufacturing segments, a large number of

EU companies have a presence in India, either to service the growing Indian market

or to export their products. Table 3.2.3 lists some EU automobile and auto-component

manufacturing companies and their presence in India. India is an automobile and auto-



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component manufacturing hub for EU companies, and increasingly they are outsourcing

from India to reduce costs. Many companies such as BMW (Bayerische Motoren Werke

AG) (Germany), Bosch GmbH (Germany) and AB Volvo (Sweden) have international

purchase offices in India. Some EU auto-component manufacturing companies supply

parts to Indian automobile manufacturers like Tata Motors. The survey found that many

of their clients (30 to 60 per cent of the total) are fixed clients. Most of the companies

pointed out that the current size of the Indian market is small (around 2 per cent compared

to their global operations) but it is increasing at a rapid pace (30 per cent per annum).

There is intense competition in the small car segment. The Indian domestic market

is small for high-end luxury cars compared to countries like China. However, German

companies like Audi AG, BMW and Mercedes-Benz have rapid expansion plans in

India. In fact, during the survey, Audi pointed out that the growth in 2009 was likely to

be 70 per cent more than in the previous year.

In the heavy commercial vehicles segment, Indian companies like TELCO (Tata

Engineering and Locomotive Company Limited), Ashok Leyland Limited and the Eicher

Group have strong positions. Volvo has been successful in entering the Indian public

transport segment. It is working with state transport corporations like the Bangalore

Metropolitan Transport Corporation to supply buses. It also has a strong presence in

the inter-city transportation segment.

During the survey, EU companies pointed out that the average wage bill in India is

lower than that in Europe (25 per cent of the cost of operations against 40 per cent in

Europe) and that has helped them lower costs and maintain global competitiveness.

The companies also pointed out that they do not have problems in getting licences/

clearances to set up operations, in getting skilled labour and in importing machinery.

EU companies have also established a presence or shown interest in other

manufacturing segments. In railways, EU companies have shown an interest in rolling

stock and component manufacturing. For instance, Siemens Transportation System

(Germany) has tied up with the public sector enterprise, Rail India Technical and

Economic Services (RITES), to produce wagons. Indian companies also cater to a

number of EU clients. In ship building, Indian capacity is smaller than in countries like

Korea, Japan and China but it has a number of clients from EU member states such

as Denmark. For instance, in 2007, Larsen and Toubro (L&T) got a €67.04 million

contract for ship construction from the Netherlands-based company, BigLift Shipping

BV, which is part of the Spliethoff Group of the Netherlands.



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Tab

le 3

.2.3

: sn

apsh

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of

eu

rop

ean

au

tom

ob

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uto

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Who

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onda

(Jap

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)

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s (U

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nit

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up o

f In

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m

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mot

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lly

Dom

estic

and

ex

port

s m

arke

t

Mos

tly In

dian

co

mpa

nies

suc

h as

LM

L (In

dia)

, Baj

aj

Aut

o Lt

d. (I

ndia

)

��Th

ree-

whe

eler

s in

clud

ing

pass

enge

r an

d go

ods

carr

iers

Pia

ggio

SpA

(Ita

ly)

Who

lly-o

wne

d su

bsid

iary

; m

anuf

actu

res

mot

orcy

cles

loca

llyD

omes

tic a

nd

expo

rts

mar

ket

Baj

aj A

uto

Ltd.

(Ind

ia)

(2)

au

to-c

om

po

nen

ts

��B

osch

Gm

bH (G

erm

any)

;

��Lu

cas

Indu

strie

s P

lc. (

UK

)

��B

osch

Indi

a Lt

d. W

holly

-ow

ned

subs

idia

ry, o

wn

man

ufac

turin

g an

d R

&D

cen

tre

��Lu

cas

Indu

strie

s. J

oint

ven

ture

w

ith T

VS

Ltd

. (In

dia)

Dom

estic

and

ex

port

s m

arke

t

Bha

rat

Forg

e Lt

d.

(Indi

a)

Sun

dara

m F

aste

ners

Lt

d. (I

ndia

)



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Construction and consultancy related to transport and logistics is also a prime area

of investment by EU companies in India. Some companies which originated in EU

member states, such as L&T, have had a presence in India for a number of years,

while others like Isolux Corsan (Spain) have recently entered the Indian market. During

the survey, it was pointed out that the recent focus of the Indian government on

infrastructure development offers huge opportunities for EU companies. Table 3.2.4

shows that EU companies have a presence across a wide range of infrastructure

projects. These include construction of highways, underground tunnelling for metro

rail, and sub-sea sewage tunnels and bridges. The modes of operations include BOT

and BOOT, and the services range from turnkey projects to specific constructions.

Many of them are involved in consultancy services and in maintenance, design,

feasibility studies, technical audit, planning, project management and engineering.

They are also involved in transport-related IT development (such as transport

management software), traffic projections and traffic control systems, development

and implementation of automation and safety systems, and toll management and

parking management. For infrastructure projects, EU companies prefer to operate in

joint ventures or a consortium where they provide technical expertise while the Indian

partner handles legal and other issues.

EU companies did not have a large presence in the early years of national highway

construction (which was dominated by companies from countries like Malaysia, Russia

and Turkey), but of late their presence in this area has increased. The survey found

that while EU companies face competition in general construction areas like road

construction due to their higher charges, they seem to do well in complex construction

projects like underground tunnels for metro rail or projects in which sophisticated

technologies are required. In ports, shipping companies such as the Maersk Group

have made significant investments in JNPT and Port Pipavav in India.



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Tab

le 3

.2.4

: sn

apsh

ot

of

eu

rop

ean

co

nst

ruct

ion

an

d c

on

sult

ancy

(c

&c

) co

mp

anie

s’ p

rese

nce

in t

he

ind

ian

mar

ket

seg

men

te

uro

pea

n c

om

pan

ies

form

of

op

erat

ion

an

d b

usi

nes

s in

ind

iaT

ype

of

pro

ject

s u

nd

erta

ken

Mai

n c

om

pet

ito

rs in

ind

ia

1. c

on

stru

ctio

n��

Som

a Is

olux

Ltd

. (In

dia-

Spa

in)

��D

YW

IDA

G In

tern

atio

nal

Gm

bH (D

YW

IDA

G)(G

erm

any)

��S

oma

Isol

ux is

a c

onso

rtiu

m o

f S

oma

Ent

erpr

ises

of

Indi

a an

d Is

olux

Cor

san

of S

pain

��D

YW

IDA

G In

dia

(P) L

td. –

w

holly

-ow

ned

subs

idia

ry

��S

oma

Isol

ux h

as u

nder

take

n ro

ad

and

high

way

con

stru

ctio

n pr

ojec

ts

��D

YW

IDA

G is

invo

lved

in

cons

truc

ting

unde

rgro

und

sect

ions

in

Del

hi M

etro

pro

ject

s.

Indi

an c

ompa

nies

suc

h as

La

rsen

& T

oubr

o Lt

d. (L

&T)

; G

amm

on In

dia

in r

oad

&

high

way

con

stru

ctio

n; IR

CO

N

in a

ll ty

pes

of in

fras

truc

ture

pr

ojec

ts.

2. c

on

sult

ancy

��H

alcr

ow G

roup

Ltd

(UK

)

��S

YS

TRA

S.A

. (S

ystè

mes

de

Tran

spor

t) (F

ranc

e)

��A

lsto

m T

rans

port

S.A

(Fra

nce)

��H

alcr

ow C

onsu

lting

Indi

a P

vt.

Ltd.

(HC

IPL)

– W

holly

-ow

ned

subs

idia

ry

��S

YS

TRA

MV

A C

onsu

lting

Indi

a P

vt. L

td. -

sub

sidi

ary

��A

LSTO

M P

roje

cts

Indi

a Lt

d.(A

PIL

) – m

ajor

ity-o

wne

d su

bsid

iary

��H

CIP

L pr

ovid

es c

onsu

ltanc

y an

d pl

anni

ng s

ervi

ces

in h

ighw

ays,

br

idge

s, r

ailw

ays,

civ

il en

gine

erin

g,

etc.

��S

YS

TRA

has

pro

vide

d co

nsul

tanc

y so

lutio

ns t

o In

dian

Rai

lway

s;

desi

gn d

evel

opm

ent

for

over

head

se

ctio

ns, s

tatio

n eq

uipm

ent

for

met

ro r

ail t

rans

port

pro

ject

s. A

PIL

ha

s un

dert

aken

dev

elop

men

t,

desi

gn a

nd m

anuf

actu

re o

f ch

air

cars

/ coa

ches

for

Indi

an R

ailw

ays;

de

sign

, man

ufac

ture

, ins

talla

tion,

&

com

mis

sion

ing

of a

utom

atic

tra

in

cont

rol a

nd s

igna

lling

sys

tem

s in

m

etro

rai

l pro

ject

s.

L&T-

Ram

boll

Con

sulti

ng

Eng

inee

rs L

td. (

Indi

a-D

enm

ark)

; R

elia

nce

Infr

astr

uctu

re L

td.

(Indi

a) f

or r

oad

and

airp

ort

proj

ects

.

RIT

ES

for

rai

lway

pro

ject

s.



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Inter-government agreements play a key role in the case of the railways which is

still a government monopoly. For instance, in 2008 the Ministry of Railways signed

a Memorandum of Understanding (MoU) with French National Railways SNCF

International (Société Nationale des Chemins de Fer) to develop high-speed lines and

enhance the capacity of freight corridors. Similar agreements have been signed with

Germany, Italy and Austria for technical help and co-operation. French companies

such as Alstom Transport SA and Alcatel CGA Transport have been present in India

for a long time. They provide services such as automatic fare collection systems,

signalling and telecommunications systems, and electrification and maintenance of

railway tracks, among others.58

Many EU companies have PPP projects with the Indian government. When asked

about the size of the Indian market and future growth potential, they said that on

average, the revenue from their Indian operations accounted for less than 5 per cent

of their total global revenue. However, the Indian market is growing, whereas the

European market is becoming saturated. They projected the growth rate in India at

between 40 to 100 per cent – which is very high. The companies pointed out that they

did not have any major problems in importing machinery or getting labour. However,

the labour regulations are cumbersome.

With infrastructure development, liberalisation and the integration of the Indian

economy with the world, the scope for providing passenger and goods transportation

has increased. The EU airlines pointed out that they have gained from the open sky

policy of the Indian government. Airport infrastructure is improving but they raised

concerns about the ground-handling policy and high airport charges in India (which are

discussed in Section 4). The survey found that there is intense competition among

airline companies from EU member states.

In shipping, especially container shipping, EU companies have the dominant share.

Five companies, namely, A.P. Moller-Maersk Group (Denmark), Mediterranean

Shipping Company S.A (MSC) (USA), CMA CGM S.A (France),59 Evergreen Shipping

Line (Taiwan) and Hapag Lloyd AG (Germany), account for 45 per cent of the market.

The survey found that code-sharing and cargo-sharing agreements have helped the

companies expand their operations. In future, passenger and goods flow between

India and the EU is likely to increase with the signing of the BTIA and reduction in

58 http://www.delhimetrorail.com/corporates/tenders/major_contractors.html

59 Named after the merger of two companies – Compagnie Générale Maritime and Compagnie Maritime d'Affrètement.



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trade barriers. This provides opportunities for EU airline and shipping companies. With

the growth of bilateral trade and the development of shipping and air transport, allied

sectors such as maritime insurance have also benefited.

A large number of EU companies have a presence in freight transportation and

logistics. Table 3.2.5 lists some companies and their modes of operation in India.

Companies such as DHL have a wide network of operations in India and provide end-

to-end logistics services; it also offers express delivery services. The survey found

that the share of the Indian market in EU companies’ total logistics business is small

(around 3 per cent) but it is growing at a rapid pace (20-25 per cent). Around 90 per

cent of the survey respondents pointed out that they are expanding their operations

either in terms of covering more cities, offering additional services or increasing

investment in equipment and technology. EU companies are expanding their

operations through joint ventures, alliances and strategic partnerships. For instance,

France-based GeoPost Intercontinental has bought a 60 per cent share in the Delhi-

based Continental Air Express. The survey found that most EU companies begin their

operations in the western, southern or northern parts of India (where business and

trade are concentrated) and then gradually spread to the east. The survey also found

that while EU companies have a strong presence in logistics, their presence is limited

in certain sub-segments (such as cold chains) where India needs investment. The

EU companies want to invest in dedicated freight corridors for railway transport and

dedicated gateways in airports.



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Tab

le 3

.2.5

: sn

apsh

ot

of

eu

rop

ean

Lo

gis

tics

ser

vice

pro

vid

ers

(fre

igh

t fo

rwar

der

s, e

xpre

ss d

eliv

ery

serv

ices

pro

vid

ers,

cu

sto

ms

clea

rin

g a

gen

ts, e

tc.)

in in

dia

so

me

eu

rop

ean

co

mp

anie

s fo

rm o

f o

per

atio

n/

bu

sin

ess

are

a o

f sp

ecia

lisat

ion

Mai

n c

om

pet

ito

rs in

ind

ia

��D

euts

che

Pos

t D

HL

(DP

DH

L)

(Ger

man

y)

��Th

omas

Nat

ionw

ide

Tran

spor

t N

.V (T

NT)

(N

ethe

rland

s)

��C

MA

CG

M G

loba

l (In

dia)

Pvt

. Li

mite

d (F

ranc

e)

��E

xper

t Lo

gist

ics

Pvt

. Lim

ited

(UK

)

��S

eaw

ays

Rhe

nus

Logi

stic

s Li

mite

d (G

erm

any)

��D

achs

er G

mbh

(Ger

man

y)

��D

SV

Air

& S

ea H

oldi

ng A

/S

(Den

mar

k)

��D

omes

tic s

ervi

ces

of D

PD

HL

are

offe

red

thro

ugh

Blu

e D

art

Exp

ress

Indi

a Lt

d. w

hich

is

ful

ly o

wne

d by

DP

DH

L

��TN

T In

dia

Ltd.

– w

holly

-ow

ned

subs

idia

ry

��C

MA

CG

M G

loba

l (In

dia)

Pvt

. Ltd

. -

subs

idia

ry

��E

xper

t Lo

gist

ics

Indi

a P

vt. L

td. -

sub

sidi

ary

of U

K-b

ased

DR

L H

oldi

ngs

Ltd.

��Jo

int

vent

ure

betw

een

Sea

way

s G

roup

of

Indi

a an

d R

henu

s A

G &

Co.

KG

of

Ger

man

y

��A

FL D

achs

er P

vt. L

imite

d is

a jo

int

vent

ure

betw

een

AFL

Car

go a

nd D

achs

er G

mbH

, of

Ger

man

y

��D

SV

Air

and

Sea

Indi

a P

vt. L

td. –

who

lly-

owne

d su

bsid

iary

��D

PD

HL,

TN

T - s

peci

alis

e in

exp

ress

del

iver

y se

rvic

es

��C

MA

CG

M -

spec

ialis

es in

con

tain

er

ship

ping

ser

vice

s

��E

xper

t Lo

gist

ics

Indi

a P

vt. L

td. p

rovi

des

inte

grat

ed lo

gist

ics

serv

ices

��S

eaw

ays

Rhe

nus

Logi

stic

s Lt

d pr

ovid

es

inte

grat

ed lo

gist

ics

serv

ices

incl

udin

g co

ld

stor

age

serv

ices

��A

FL D

asch

er p

rovi

des

ocea

n an

d ai

r fr

eigh

t se

rvic

es, c

usto

ms

clea

ranc

e an

d in

tegr

ated

m

anag

emen

t so

lutio

ns in

pro

ject

car

go

��D

SV

off

ers

air

and

sea

frei

ght

tran

spor

t,

dom

estic

dis

trib

utio

n, w

areh

ousi

ng,

cust

oms

clea

ranc

e se

rvic

es.

Des

k-to

-Des

k C

ourie

r (D

TDC

) (In

dia)

, Uni

ted

Par

cel S

ervi

ce (U

PS

) (U

SA

) in

expr

ess

deliv

ery

serv

ices

Shi

ppin

g C

orpo

ratio

n of

Indi

a Li

mite

d. (S

CI),

Med

iterr

anea

n S

hipp

ing

Com

pany

(MS

C) (

US

A) i

n co

ntai

ner

ship

ping

ser

vice

s

Pan

alpi

na G

roup

of

Sw

itzer

land

, B

roek

man

Log

istic

s Lt

d. o

f N

ethe

rland

s, a

nd A

PL

Logi

stic

s Lt

d. (S

inga

pore

) in

inte

grat

ed

logi

stic

s se

rvic

es.



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3.3 india-eU collaboration: implications for the Transport sector

India’s relations with the EU date back to 1962 when India was among the first countries

to set up diplomatic relations with the European Economic Community (EEC). This

relationship deepened over the years, but was primarily confined to economic co-

operation, trade and development issues. It took a new turn with the Lisbon Summit

of June 2000 and, in this and the following two summits, the focus was on building a

‘Strategic Partnership’. So far, the two economies have had 10 summits alternately in

India and in EU member states. At the 5th Summit at The Hague in November 2004,

the relationship was upgraded from an economic one to a Strategic Partnership. India

was the sixth country (after USA, Russia, China, Japan and Canada) to have a strategic

partnership with the EU. In the 6th Summit in Delhi in September 2005, a High-Level

Trade Group (HLTG) was established to explore ways to deepen and widen the bilateral

trade and investment relationship. This HLTG recommended a Broad-based Trade and

Investment Agreement or BTIA in the 7th Summit in Helsinki. In June 2007, the EU and

India began negotiations on the BTIA in Brussels. Several rounds of negotiations have

been completed and the BTIA is likely to be signed by the end of year 2010.

In the field of science and technology, India and the EU signed a Science and Technology

Agreement in 2001. The agreement covers sustainable development and also includes

a legal framework to safeguard intellectual property rights. Under this agreement,

both Indian and EU researchers can access each other’s research programmes. EU’s

Galileo project60 is an important example of India-EU strategic partnership. India and

the EU are also jointly working on clean technologies which have implications for the

transport sector.

In 2004, India and the EU signed a Customs Co-operation Agreement to make customs

procedures less complex and facilitate trade pertaining to customs in accordance with

international standards. The agreement also provides for the exchange of information

and mutual administrative assistance for countering fraud against respective customs

legislation.

Since 1984, the research and innovation activities of the EU have been grouped under

the Framework Programme (FP). The Sixth Framework Programme (FP6) (2002–2006)

had a budget of €17.5 billion. About 80 projects (out of 5,300) funded through FP6

60 The Galileo Project is a satellite-based navigation system based on a constellation of 30 satellites orbiting at 24,000 km similar to the Global Positioning System (GPS) of the US and Russia’s Glonass.



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involved Indian researchers. The Seventh Framework Programme (FP7) (2007–2013)

is ongoing and the programme has a strong focus on India. Collaborative research

has been identified under nine priority areas in the FP7 programme, one of which is

transport (including aeronautics) with an allocation of €4.2 billion.

At the member country level, India has Bilateral Investment Protection Agreements

(BIPA)61 with 16 of the EU member states and Double Taxation Avoidance Agreements

(DTAA)62 with 18 of the EU member states. This benefits companies from India and

EU member states.

As mentioned earlier the India-EU BTIA will be a comprehensive agreement that

includes the transport and logistics sector. In addition, India and the EU are negotiating

a Horizontal Air Services Agreement and a Maritime Agreement (see below).

a. India-EU Horizontal Air Services Agreement

At the sixth India-EU summit held at New Delhi in September 2005, India and the

EU decided to launch a broad-based dialogue in the sector of civil aviation including

restoring legal certainty to bilateral air services agreements; closer co-operation in

air transport technology, regulation and infrastructure; and assessing the scope for

mutual benefits that could be derived from a more comprehensive co-operation. The

two economies have already had an India-EU Civil Aviation Project which is the largest

bilateral economic co-operation project in India. This project aimed to strengthen civil

air safety and to stimulate co-operation between Indian and EU civil aviation authorities

and aviation industries. Also, India has 26 bilateral air services agreements including

traffic rights with individual EU member states.

The India-EU Horizontal Civil Aviation Agreement was signed on September 29, 2008

at the 9th India-EU Summit in Marseille. This agreement aimed to provide legal certainty

to the 26 bilateral air services agreements that India has had with individual EU member

states by bringing these into conformity with Community law. The agreement does

not cover traffic rights which continue to be negotiated through bilateral arrangements.

Since traffic rights are bilaterally negotiated, the extent of air transport liberalisation

between the EU and India still depends on the bilateral negotiations. The European

61 BIPA encourages, promotes and protects bilateral investments by enforcing the legal rights of investors and by guaranteeing fair and equitable treatment to the investment of the bilateral partner.

62 Double taxation may arise when the jurisdictional connections used by different countries overlap or it may arise when the taxpayer has connections with more than one country. The DTAA protects tax-payers against double taxation. It also provides reduced tax rates on dividends, interest, royalties, technical service fees, etc. received by residents of one country from those in the other.



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Commission has proposed negotiating a comprehensive air services agreement

between the EU and India.

b. Bilateral Maritime Agreement between India and the EU

India and the EU are also currently negotiating a bilateral maritime agreement. After the

breakdown of the multilateral negotiations in the maritime sector in the Uruguay Round of

WTO negotiations, the European Council gave a mandate to the European Commission

to negotiate bilateral agreements in the maritime sector with India. Formal negotiations

started in the Seventh India-EU summit at Helsinki, held on October 13, 2006.

The EU side has two key objectives:

�� Legal consolidation and increased market access for EU shipping companies

in India to enable them to establish themselves and carry out door-to-door

business in the country.

�� Establish structured co-operation with India on all major maritime issues

affecting the sector, such as maritime safety and security.

The Indian side, on the other hand, seeks to support employment opportunities

in maritime auxiliary services and ensure the safety of seafarers (relating to the

protection of seafarers involved in alleged crimes on board ships) by facilitating the

participation of investigators as observers in the investigations and a general reference

to co-operation in the International Maritime Organisation (IMO), International Labour

Organization (ILO) and other international forums regarding the safety of seafarers.

During the survey, it was pointed out that the maritime agreement will consolidate the

present market access situation and thus not be a threat to the Indian fleet. On the

contrary, it will boost competition within the Indian shipping industry, increase quality

and reduce costs both for Indian exports and imports inter alia by favouring trans-

shipment in Indian hub-ports. At the same time it will create a framework for future

maritime co-operation and form the basis for exchanging views, best practices, etc. and

thus strengthen relations even further in areas such as maritime safety, security and

training. The agreement will also be a strong signal for investments in infrastructure,

logistics, etc., as experiences have shown in other parts of the world, thus benefiting

the Indian economy at large. However, the progress of the negotiations has been slow.



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3.4 scope for enhancing Trade, investment and collaboration

The discussion in Section 3.2 shows that EU companies are optimistic about their future

growth prospects in India and most of them predict a very high growth rate. At present,

companies from EU member states are present across all segments of transport

and logistics services. Since the Indian government is focusing on infrastructure

development, there is further scope for investment in India. In the long run, as

infrastructure develops, there will be scope for new services such as toll management

and traffic and parking management. The investment can also shift from provision of

infrastructure to carriage, i.e., facilitating movement of cargoes and passenger using

the newly created infrastructure. For instance, there is scope for investment in inter-

city and intra-city bus transportation, running buses in high-capacity bus corridors and

running and maintaining mass rapid transportation. There is also scope for investment

in cold chains and integrated logistics services. Co-operation in environment-friendly

fuel technologies and lighter, safer and cost-competitive engines and battery-operated

cars can be mutually beneficial. Indian and European companies can have joint R&D

programmes for fuel-efficient technologies. Table 3.4.1 below shows that the present

technical standards differ in India and the EU. Thus, there is scope for collaboration

in streamlining the technical standards across transport equipment and environment-

friendly technologies. Sharing knowledge and information on technical standards

would benefit companies from both India and EU member states.



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Table 3.4.1: Technical standards for Logistics sector: india and the eU

s. No. relevant area india eU

1. Tyres for vehicles ‘BIS Certification Mark (BIS Standard Mark)’

The ‘e-mark’ issued by the EC

2. �� Transport Engineering

�� Basic and Production Engineering

�� Civil Engineering

�� Electro-Technical

�� Electronics and IT

�� Mechanical Engineering

�� Management and Systems

�� Metallurgical Engineering

‘BIS Certification Mark (BIS Standard Mark or the ‘ISI Mark’)63

i. Formal type approval and the ‘e-mark’: For automobiles and automotive components, and for in-vehicle electronic subassemblies (ESAs).64

ii. The ‘CE-Mark’ for machinery; electrical equipment; pressure equipment; simple pressure vessels; construction products.

3. Emission Standards ‘Bharat Stage’ fuel emission standards/ norms issued by the Govt. of India.

i. ‘Euro Norms’ for fuel standards, issued by the EC.

ii. Emission limits by car manufacturers are subject to voluntary commitments between auto manufacturers and the EC (the ACEA Agreement); other EC legislations.65

Source: Compiled by the authors.

However, EU companies pointed out that they face barriers in India. These are given

below. If these are addressed in the India-EU BTIA, it will enhance trade, investment

and collaboration.636465

63 Details of standards under each category are listed at the Bureau of Indian Standards (BIS) website, http://www.bis.org.in/sf/nrstd.htm. Standards for automobiles and automotive components are formulated by the Automotive Industry Standards Committee (AISC) under MORTH and BIS.

64 EC Directive 95/54/EC defined acceptable performance criteria for electromagnetic emissions and susceptibility of in-vehicle electronic subassemblies (ESAs). In this, ESAs are defined in two groups: (i) components and (ii) separate technical units (STUs). After-market electronic products fall into ‘components’ that may be fitted to differing makes and models of vehicles. STUs are specific to a given make of vehicle and are usually fitted by the vehicle manufacturer.

65 Emission standards are defined in a series of EU Directives staging the progressive introduction of increasingly stringent standards.

63

64

65 NON-TARIFF BARRIERS IN THE TRANSPORT AND LOGISTICS SECTORS: INDIA


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4. Barriers faced by eU companies in india


49BARRIERS FACED By Eu COmPANIES IN INDIA

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Although the transport and logistics sector in India has been significantly

liberalised, there are important areas of concern. These include lack of adequate

infrastructure, delays in processing documents, and lack of legal certainty due to the

evolving regulations. The World Bank’s ‘Doing Business Report 2010’,66 which ranks

183 countries in terms of ease of doing business based on 10 indicators, ranked

India 133rd. Table 4.1 shows India’s comparative position vis-à-vis other developing

countries. The indicator, trading across borders, reflects logistics and transportation

issues; on this indicator, India has a much lower rank than China.

Table 4.1: ranking on World Bank’s doing Business report (2010)

parameter india china Brazil

Doing business 133 89 129

Starting a business 169 151 126

Enforcing contracts 182 18 100

Dealing with construction permits 175 180 113

Employing workers 104 140 138

Registering property 93 32 120

Getting credit 30 61 87

Protecting investors 41 93 73

Trading across borders 94 44 100

Closing a business 138 85 131

Paying Taxes 169 125 150

Source: http://www.doingbusiness.org/

Leunig et al. (2009) compare the logistics performance of BRIC countries (Brazil,

Russia, India, and China) with that of a less developed EU member country (Poland)

and a developed EU member country (Germany), and found that air freight costs less

in China than in India. The time taken to clear customs is longer in India than in Russia

or China, and on physical inspection India is the worst among the BRIC countries;

in India, authorities inspect 25 per cent of shipment compared to only 2 per cent

in Germany and 3 per cent in Poland (Table 4.2). The study concluded that if India

adopts international best practices and lowers transportation costs, trade volumes will

increase by 10-20 per cent.

66 This report has been tracking reforms aimed at simplifying business regulations, strengthening property rights, opening up access to credit and enforcing contracts by measuring their impact on 10 indicators. It provides a quantitative measure of regulations for starting a business, dealing with construction permits, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business. Ranking on the ease of doing business is the average of the economy’s ranking on these 10 indicators. Two new economies - Cyprus and Kosovo - have been added to the list.


50 BARRIERS FACED By Eu COmPANIES IN INDIA

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Table 4.2: rankings for Bric countries, germany and poland on selected parameters

parameter Brazil russia india china germany poland

Air-borne freight costs: 10 kg (Best:$0; Worst: $500) 4 5 2 1 - 3

Sea-borne shipping costs: 40’ unit (Best:$0; Worst: $500) 4 6 2 1 3 5

Availability of review procedures (Worst: 0%; Best: 100%) 4 4 2 3 1 4

Chance of physical inspection (Worst: never; Best: half) 4 5 6 3 1 2

Customs clearance times (Worst: 7 days; Best: instant) 5 2 3 2 1 4

Import & export lead times (Worst: 7 days; Best: instant) 6 2 5 4 1 3

Source: Compiled from Leunig et al. (2009), p. 11-13.

The World Bank’s Logistics Performance Index (LPI) 2010 ranks 155 countries on

seven logistics parameters. Table 4.3 gives the rank of selected EU member countries

and India. It shows that India performs better than some EU member countries but

has a much lower rank than others.

Table 4.3: World Bank’s Logistics performance index (Lpi): ranks of selected eU

Member countries and india

country and rank Lpi customs

infrastructure

international shipments

Logistics competence

Tracking & tracing

Timeli- ness

Germany (1) 4.11 4.00 4.34 3.66 4.14 4.18 4.48

Sweden (3) 4.08 3.88 4.03 3.83 4.22 4.22 4.32

Netherlands (4) 4.07 3.98 4.25 3.61 4.15 4.12 4.41

UK(8) 3.95 3.74 3.95 3.66 3.92 4.13 4.37

China (27) 3.49 3.16 3.54 3.31 3.49 3.55 3.91

Poland (30) 3.44 3.12 2.98 3.22 3.26 3.45 4.52

Slovak Republic (38) 3.24 2.79 3.00 3.05 3.15 3.54 3.92

india (47) 3.12 2.7 2.91 3.13 3.16 3.14 3.61

Hungary (52) 2.99 2.83 3.08 2.78 2.87 2.87 3.52

Greece (54) 2.96 2.48 2.94 2.85 2.69 3.31 3.49

Slovenia (57) 2.87 2.59 2.65 2.84 2.90 3.16 3.10

Romania (59) 2.84 2.36 2.25 3.24 2.68 2.90 3.45

Source: Compiled from LPI, World Bank (2010), which ranks 155 countries.Note: The ranking is on a scale of 1-5; 1 is the lowest score and 5 is the maximum score.



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Not only are there barriers to international trade, but there are also several impediments

to intra-state movement of goods in the country because India is not a single market.

The World Bank estimates67 point out that there is significant divergence among

Indian cities. For example, it takes approximately $432 (€306) to export a container

from Kochi, but the figure is about three times higher for Jaipur ($1289 or €914).68 A

Planning Commission study on the logistics sector in India found that logistics costs in

India as a percentage of GDP increased from 13.41 per cent in 1999-00 to 14.97 per

cent in 2005-06. Thus, India incurs around 15 per cent of its GDP as cost in logistics

compared to around 9 per cent in the US and 11-12 per cent in European markets.69

The study found that transportation accounts for 62 per cent of the total logistics

costs. It pointed out that for inter-state transportation a typical goods carrier has to get

clearance from around seven different agencies, including the sales tax department

of respective states, regional transport officers, state excise departments, forest

departments, and civil supplies departments. A study by the Transport Corporation of

India (TCIL)70 found that there are on average 25 stops (15 for toll collection) on the

route between two major cities – Delhi and Bangalore – with average stoppage time

of five hours. The study tried to quantify the effect of check post delays by assuming

that there are 3 million vehicles. It found that check post delays cost the economy

approximately Rs. 30 billion per annum (€0.45 billion). The study also found that the

cost of the additional fuel consumption in India due to poor road conditions and check

post delays is about Rs 200-250 billion (€3-3.75 billion) per annum.71

During the survey EU companies were asked to list the barriers that they face in India on

a scale of 1 to 5, with 1 being the most restrictive barrier. Table 4.4 gives the percentage

of respondents who said “most restrictive” and “restrictive” barriers in each category

of service provision. This was a multiple-choice question and companies referred to

more than one barrier depending on the type of service that they provided. For logistics

companies, the adequacy and quality of the infrastructure were major barriers.

67 www.doingbusiness.org/subnational/exploreeconomies/ExploreEconomies.aspx?economyid=361 and www.doingbusiness.org/subnational/exploreeconomies/ExploreEconomies.aspx?economyid=360

68 These figures are calculated using the average exchange rate for fiscal year 2009-10: $1 = €0.7092. Source: www.oanda.com

69 Planning Commission (2009b).

70 http://www.tcil.com/pdfs/TCI-IIMC%20report.pdf

71 Phis figure is calculated using the average exchange rate for fiscal year 2009-10: Rupee 1 = €0.015. Source: www.oanda.com



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Tab

le 4

.4: B

arri

ers

face

d b

y e

U c

om

pan

ies

in in

dia

by

Nat

ure

of

Bu

sin

ess

in p

erce

ntag

e

Log

isti

cs s

ervi

ce

pro

vid

ers

co

nst

ruct

ion

&

co

nsu

ltan

cye

qu

ipm

ent/

au

to

Man

ufa

ctu

rin

gc

on

tain

eris

ed c

arg

o c

arri

ers/

s

hip

pin

g c

om

pan

ies

Tra

nsp

ort

/ c

ha

a

sso

ciat

ion

s

Inad

equa

te p

ower

3340

-

Inad

equa

te r

oad

netw

ork,

pot

hole

s/ot

her

road

pro

blem

s89

-10

-63

Inad

equa

te u

se o

f IT

--

--

13

Inad

equa

te r

ail i

nfra

stru

ctur

e, la

ck o

f fr

eigh

t co

rrid

ors

100

--

-13

Lack

of

faci

litie

s at

airp

orts

56-

--

Lack

of

faci

litie

s at

por

ts56

--

8038

Mul

tiple

lice

nsin

g re

quire

men

ts-

--

-13

Tax-

rela

ted

prob

lem

s33

--

-13

Bur

eauc

racy

/cor

rupt

ion/

brib

es78

5020

-

Lack

of

skill

ed m

anpo

wer

4417

40-

13

Leng

thy/

cum

bers

ome

proc

edur

es89

-20

--

Pro

blem

s w

ith E

DI f

acili

ty78

--

--

Inte

r-m

odal

tra

nspo

rt p

robl

ems

22-

--

-

Hig

h co

st o

f op

erat

ions

or

fuel

/ low

mar

gins

22-

--

-

Pro

blem

s w

ith In

dian

lega

l sys

tem

-33

10-

-

Non

-tra

nspa

rent

bid

ding

-17

--

-

Pro

blem

s in

get

ting

data

/info

rmat

ion

-17

--

-

Labo

ur r

egul

atio

ns-

17-

--

Diffi

culti

es in

impo

rtin

g eq

uipm

ent

-17

--

-

Cum

bers

ome

envi

ronm

enta

l cle

aran

ces

-17

--

-

Crim

e, t

heft

, dis

orde

r-

33-

--

Del

ays

in r

ecei

pt o

f pa

ymen

t-

50-

--

Cus

tom

s cl

eara

nce-

rela

ted

prob

lem

s-

--

-25

Res

tric

tions

& d

elay

s in

inte

r-st

ate

good

s m

ovem

ent

--

--

13

Diff

eren

ces

in s

tate

reg

ulat

ions

--

--

13

Sou

rce:

Com

pute

d by

the

aut

hors

fro

m in

dust

ry s

urve

y re

sults

.

Not

e: R

espo

nden

ts w

ere

aske

d to

ran

k th

ese

fact

ors

in o

rder

of

thei

r im

port

ance

; cel

ls le

ft b

lank

indi

cate

fac

tors

tha

t th

e co

mpa

nies

did

not

find

impo

rtan

t.



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The survey found that there are FDI restrictions in certain sectors such as air transport

and railways. Companies did not find this a major barrier in the case of airlines, because

several countries, including EU member states, have FDI restrictions on airlines.

However, the monopoly position of the Indian Railways sometimes makes it difficult to

do business despite the fact that the Indian Railways is trying to attract the private sector

through PPP projects. This is because even for PPP projects there are delays in award of

contracts due to monopoly-related efficiencies and bureaucracy. The survey found that

although the private sector has shown an interest in investing in multi-modal logistics

parks proposed by the Indian Railways, tender approval processes and addressal of land

acquisition problems remain slow. Due to the government monopoly, private players are

not allowed in passenger train movement, except in the case of mass rapid transport.

In many areas, regulations are still evolving, so there is uncertainty about the rules. For

instance, India is in the process of initiating a postal bill which is likely to impact the

operations of courier and express companies. After airport privatisation, there is a new

regulator, AERA, which will set up a new regulatory framework. Some EU companies

have made substantial investments in ground handling and now they are not sure whether

India will impose restrictions on the number of ground handling agents. They are also

doubtful about the future pricing model in privatised airports. The Planning Commission

(2009a) in its ‘Draft Regulatory Reform Bill 20**’ has proposed regulators in 12 sectors

including postal, airports, ports, railways, mass rapid transit system (MRTS), highways,

and waterways.72 The regulatory framework for these sectors is likely to change and

this has resulted in operational uncertainties. At the same time, some recent regulations

are incomplete. For instance, the Warehousing (Development and Regulation) Act,

2007 regulates only warehouses that propose to issue negotiable warehouse receipts.

The 1993 Multimodal Transport of Goods (MTG) Act is outdated in terms of recent

developments in integrated logistics. It suffers from several shortcomings such as

exclusion of air freight operators, exclusion of imports, requirements of annual renewal

of the multimodal transport operator (MTO) licence and higher liabilities for the operator.

Since the transport and logistics sectors are regulated by multiple ministries/ departments

at the centre, state and local levels (see Table A.1 in Appendix A), this has resulted in

cumbersome and multiple regulations. Over 40 acts and more than 20 government

bodies govern this sector, which results in high administration and compliance costs.

The presence of a large number of ministries results in a fragmented approach towards

the development of transport and there is a lack of inter-ministerial co-ordination.

72 Other sectors include electricity, telecommunications and Internet, broadcasting and cable television, oil and gas, coal, water supply and sanitation.



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Logistics service providers pointed out that the lack of physical infrastructure is a major

barrier. Although the government has focused on investment in improving highways,

there are still capacity shortages and the quality of state highways and local roads

needs to be improved; the poor road conditions affect the longevity of vehicles. The

congestion at ports and lack of hinterland connectivity cause delays. Although airports

are being privatised, there are hardly any cold chain facilities. Domestic airports do

not have proper road connections to international airports in some cities and there is

no system of internal movement of cargo between the two airports. Many domestic

airports do not have covered cargo storage facilities.

Several procedures cause inordinate delays. In many states it is not easy to obtain a

transport permit; it takes 15 days to get a transport permit in West Bengal compared to

1-2 days in Maharashtra. Significant amounts of time are spent at toll booths, because

they are not open round the clock; in Orissa toll booths are closed from 7 pm till 8 am

and in West Bengal, the delays can last as long as 4-5 hours. Since many toll booths are

not computerised, electronic documentation is not possible; for instance, in Tamil Nadu,

only 8 of the 19 state-level check posts are computerised. In addition, delays are caused

by procedures, such as payment of octroi charges for certain cities in Maharashtra,

submission of a way bill73 in West Bengal, submission of multiple forms for various

government departments, the checking of documents and physical check of the vehicle,

driver and consignment by the RTO (Road Transport Office) and traffic police, and paying

highway tolls and taxes. It is reported that expenses due to delays at check posts, sales

tax-related documentation, consignment checking and unofficial payments amount to

as much as 15 per cent of the total expense. This is borne out by a study by the logistics

major, Transport Corporation of India Limited (TCIL), and IIM-Calcutta which asserted

that stoppage delays as a percentage of journey time was between 5-25 per cent.74

The companies reported a series of other problems. Bribes and corruption are

common. The passage corridors in almost 80 per cent of the check posts are very

narrow. Within city limits, there are zoning restrictions which do not allow movement

of heavy vehicles during peak hours. Warehouses are often located inside cities and

zoning restrictions impact access to warehouses. Getting a transport permit is also

not easy in many states. For instance, it takes around 15 days to get a transport permit

in West Bengal compared to 1-2 days in the state of Maharashtra. Often there are

illegal encroachments into the highways and slow-moving vehicles like bullock carts

73 A waybill is an official shipping document used to describe a shipment’s consignor, consignee, origin and destination, and the goods with their weight and freight.

74 http://www.tcil.com/pdfs/TCI-IIMC%20report.pdf



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reduce the highway speed. Some companies mentioned the lack of safety in areas

like the Naxalite-affected areas of West Bengal, Andhra Pradesh and Orissa.

Several participants mentioned the poor skill levels of staff. Many drivers do not

have the correct training or the ability to read road signs, and states use different

criteria to evaluate skill levels. Lack of highway driving skills causes delays and result

in accidents. In addition, cashiers at toll booths lack the training and computer skills

required for the job. The number of staff required is also inadequate at many booths.

In the absence of competent skills to manage traffic, there are traffic jams and delays.

In the case of the railways, the lack of dedicated freight corridors leads to capacity

constraints and delays. During the survey, it was found that cargo may take up to 5-6

days to reach Delhi from Mumbai by rail (a distance of only 1,384 kilometres) due to

capacity constraints.

Although many dedicated freight corridors have been commissioned, the date of

completion is not clear. Connectivity to ports and dry ports remains inadequate. IT

infrastructure and tracking facilities are also inadequate. The reliability, quality of

service and customer orientation is poor. Due to this, freight forwarders and shippers

prefer to use the more expensive road transport. The Indian Railways policy of cross-

subsidising passenger charges through freight charges leads to higher freight costs.

The average passenger tariff of Indian Railways is 55 per cent lower than in China,

while the average freight tariff is 66 per cent higher.75 Express companies pointed out

that although the railways are an environment-friendly mode of transport, they cannot

use it because loads have to be booked six hours in advance, and companies often

do not have such long lead times. There is no dedicated courier space in railway vans.

Many airports suffer from capacity constraints that cause delays in flight landing,

leading to congestion, fuel wastage due to delays in aircraft landing, etc. Even in

the new airports of Mumbai and Delhi, cold storage facilities are inadequate. Lack of

gateway and hinterland connectivity hinders the smooth movement of cargo. There

are delays in transfer of cargo between domestic and international airports. Many

domestic airports do not have proper cargo sheds which results in loss and damage

of cargo. Some of the barriers mentioned by airlines include high aviation turbine fuel

(ATF) prices, rising labour costs, shortage of skilled labour and sudden increases in

tariffs by privatised airports for equipment use.

75 http://www.indianexpress.com/news/on-track/1825/0



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The survey found that ships have long waits for berthing, loading and unloading. The

vessel turnaround time and waiting time in India are much higher than in international

ports.76 Most ports do not have the capacity to accommodate large ships and can

only accommodate feeder vessels; this results in delays during trans-shipment. The

equipment for cargo handling in ports is outdated, with frequent breakdowns. The

process of mechanisation is slow. The labour unions are strong, there is a lack of

skilled labour for activities like pilotage and workers do not work round-the-clock as in

other international ports.77 Due to this, despite cheap labour rates, Indian container-

handling costs are considerably higher than in other ports in the region. Port costs at

Dubai are almost 25 per cent and at Colombo and Singapore just 40 per cent of those

at the JNPT.78

Overall, cargo movement through Indian ports is low. For instance, a single port in

Europe – the Port of Rotterdam– handles more cargo than all major Indian ports taken

together (Table 4.5).

Table 4.5: Traffic handled at Major indian ports versus port of rotterdam

(in’000 tonnes)

port periodcontainer

Total cargoTonnage TEUs

JNpT (india)2007-08 51,840 4,059 55,756

2000-01 14,277 1,190 18,575

CAGR in % (2007-08 over 2000-01) 20.22 19.16 17.00

all Major indian ports2007-08 92,051 6,596 5,19,159

2000-01 32,222 2,470 2,81,104

CAGR in % (2007-08 over 2000-01) 16.18 15.06 9.16

port of rotterdam (eU)2007-08 1,07,000 10,800 4,21,100

2000-01 65,192 6,275 3,22,348

CAGR in % (2007-08 over 2000-01) 7.33 8.06 3.89

Source: Compiled by the authors from http://www.portofrotterdam.com/ and http://www.ipa.nic.in

76 Ships on Indian ports generally have to wait long in the channel for berthing, and productivity in loading and unloading is low. The national average turn-around time of vessels for dry bulk, and containers is 5.7 days and 1.9 days respectively. This is much more than major international ports like Hong Kong, Rotterdam or Singapore where vessel turnaround time is less than a day.

77 The Dock Workers Act provides protection to dock workers and in some ports there is little control over the labour force by either the stevedoring company or the port authority. This has resulted in malpractices, such as demanding “speed money” at the commencement of each shift prior to starting work, over-manning of all cargo handling operations, and disregard for safety rules.

78 For details see Planning Commission (2009b).



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In liner shipping, at least 40 per cent of the cargo is reserved for national flag ships.

Preference is given to Indian flag vessels for carrying government cargoes and

government owned/ controlled cargoes. Indian flag vessels have the first right of

refusal for carrying such cargo, and only then are foreign flag ships allowed to be in-

chartered/taken on an international basis. This restriction is sometimes relaxed on a

case-by-case basis, but it nevertheless is a constraint. In December 2009, the Ministry

of Shipping proposed rigidly imposing the cabotage condition which had been relaxed.

Public transport in many states is controlled by the government through allocation

of routes, etc. State transport departments often prefer private operators with a few

fleets rather than a single company with a large fleet. This makes it difficult to operate

in this sector although there are no apparent entry and exit barriers.

The logistics service providers argued that although India is a large country, its

logistics market is highly fragmented and comprises a number of intermediaries which

increases operational costs. For instance, the road transport sector is dominated

by small trucking companies and individual truckers. Only a few service providers

specialise in providing 3PL and 4PL services. The small operators can operate at

low margins and, therefore, larger players face tough price competition. Moreover,

a large number of Indian manufacturers are SMEs that cannot afford the services of

specialised logistics service providers; instead, they operate with multiple agents to

save costs. In the absence of a single goods and services tax, the tax structure differs

across states and there are restrictions on inter-state movements of certain goods like

agricultural products. This makes it difficult for companies to operate on a hub-and-

spoke model and set up a pan-India logistics network. For instance, to save on central

sales tax, many companies operate through C&F agents instead of setting up an

integrated logistics network. A large Indian company generally operates with as many

as 20 warehouses all over India, compared to less than 5 (on average) in developed

economies. These problems could be solved with a single goods and services tax,

which the Indian government has proposed; however, its implementation has been

postponed.

Most warehouses in India are manual, and lack bar-coding and scanning facilities.

A Planning Commission (2009b) study shows that there are as many as 20 procedures

to be complied with in setting up a warehouse in India, making it a very time-

consuming process (taking up to 270 days) compared to other developed countries

as shown in Table 4.6 below. There are others barriers such as difficulties in acquiring

land for warehousing, lack of prescribed standards of service and trading conditions



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for operators in warehouses (other than those governed by the Customs Act) and no

uniformity in warehousing standards across states.

Table 4.6: setting up a Warehouse: procedures and days required

india Korea Usa finland denmark

No. of procedures required 20 11 19 N.A 7

No. of days required 270 days 56-60 days 65-70 days 56-60 days 65-70 days

Source: Compiled from Planning Commission (2009b), p. 31.

Physical inspections by customs, multiple documentation requirements and bribes

have been cited as common barriers. Although Customs has implemented EDI, the

technology is outdated. The process is slow because it requires physical images of

invoices, consignee authorisation, import-export codes and airway bills that are not

required in EU member states. There is a lack of integration between Customs EDI

and other agencies. For certain products a ‘no-objection certificate’ is needed from

agencies such as the Drug Controllers and Wild Life Departments that do not operate

round the clock at airports. The survey found that the entire consignment gets cleared

faster in the EU than express cargo in India; it takes one day for clearance in Germany

compared to three days in India. Some custom officers, especially promoted officers,

are not well-trained. To speed up the process, 70-80 per cent of the cargo is cleared

by bribing the officers. In addition, the facilities for paying customs duties at airports

like Delhi are inadequate, with few bank counters and no on-line payment facilities.

The duty refund for short land shipments takes time (sometimes around six months).

Basic infrastructure such as power is a major barrier for manufacturers. Power is

expensive and the supply is erratic. Although manpower is cheap, companies often

do not get the right skills and have to invest in training. There are also differences

in technical standards between India and the EU. EU tyre manufacturers, railway

wagon manufacturers, and trailer manufacturers pointed out that due to differences

in technical standards, they have to re-orient or customise their products for India.

There are even state-level variations in standards; for example, each state has its own

specifications for the trailer length it will allow. In the case of the railways, even if the

company complies with Indian standards, getting approvals takes time; it takes at

least six months to get the approval after setting up the manufacturing unit for rolling

stock. Multiple and different taxes across states make it difficult to establish a uniform

pricing model across India. The existing systems of sales tax administration, vehicle

registration, issuance of driving licences and its records system are predominantly



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manual and vary from state to state. The motor vehicle tax is levied on the basis of

gross vehicle weight rather than on potential axle loads. This results in under-taxation

of 2-axle trucks compared to multi-axle vehicles (MAVs). Manufacturers pointed out

that the import duty (customs duty)79 is higher for cars than for auto-components and/

or aeroplanes. For instance, the import duty is 10 per cent for chassis fitting with

engine (HS code 8606), 3 per cent for aeroplanes and aircraft and 100 per cent for

motor cars (for details see Table B.4 in Appendix B).

Eco-friendly vehicles like battery-operated cars do not have a mass market in India for

several reasons: insufficient re-charging stations, power shortages, the high cost of

power, and insufficient refuelling facilities for Compressed Natural Gas (CNG) across

cities. There is lack of clarity in the bio-ethanol/bio-fuel policy and there are policy

inconsistencies at the centre and state level. According to the Indian Constitution,

potable alcohol is regulated by states, whereas alcohol for industrial units and for fuel

purposes is a central subject. As a result, each state has its own tax structure, rules

and regulations. This has affected free movement and uniform and rational pricing of

ethanol for blending purposes. India is also yet to have a safety standard for hydrogen

gas fuel.

Barriers in the construction sector include delays in receipt of payments after project

completion partly due to the need for multiple clearances. Such delays in the case

of road construction result in contractual complications,80 escalation of costs due

to price rise, idling of contractors’ resources, designs becoming outdated and the

possibility of road conditions deteriorating over time and requiring more maintenance.

Long gestation periods increase the risk especially if there is political instability. Many

construction projects are offered only on a non-convertible rupee payment basis. Only

government projects financed by international development agencies allow payment

in foreign currency.81 Difficulties in land acquisition have also been cited by some

companies. Foreign consultants pointed out that they have to pay taxes even if they

stay for a short duration.

When asked about the problems they face in government procurement, companies

said that the process has improved in the past decade, but there are some areas of

concern. For instance, MORTH recently changed the Model Concession Agreement

79 Basic customs duty represents the external tariff of the country applicable to goods on entry into India.

80 Under the BOT-toll system, the contractor recovers the investment through toll collection, while in BOT-annuity projects, the developer takes payments in instalments from the government.

81 http://www.ustr.gov/sites/default/files/uploads/reports/2009/NTE/asset_upload_file131_15478.pdf



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(MCA) and now five companies instead of eight have been short-listed. They further

pointed out that a minimum turnover of Rs. 500 million (€7.5 million)82 in the past year

is required for an RFQ (Request for Qualification),83 the company’s past history is

checked, and there is a scoring system for each criteria. Manpower and raw materials

have to be domestically sourced and there is a specific list for imported machinery that

has zero duty. In the case of the railways, steel and cement have to be sourced from

companies short-listed by the Indian Railways. Often there are project delays as over-

engineering, design modifications and other changes can happen after the concession

is awarded. The survey participants also pointed out that the revenue-sharing model

has not worked well in India.

In ship-building, the government gives subsides to domestic players but Indian ship-

yards are still uncompetitive due to multiple taxes, the high cost of financing and

outdated technology.

82 This figure is calculated using the average exchange rate for fiscal year 2009-10: Rupee 1 = €0.015. Source: www.oanda.com

83 The bidding process for PPP projects in India is typically divided into two stages. In the first stage, eligible and prospective bidders are shortlisted. This stage is referred to as Request for Qualification (RFQ) or Expression of Interest (EoI). The objective is to short-list eligible bidders for Stage 2 of the process. In the second and final stage, generally called the Request for Proposal (RFP) or invitation of financial bids, the bidders engage in a comprehensive scrutiny of the project before submitting their financial offers.



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5. addressing Barriers through international Negotiations


63ADDRESSING BARRIERS THROuGH INTERNATIONAL NEGOTIATIONS

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Section 3 showed that EU companies have a strong interest in the transport and

logistics sector of India and Section 4 highlighted the numerous barriers they face in

India. Since both India and EU are members of the WTO and are actively participating in

the on-going Doha Round of WTO negotiations, this section examines the possibilities

of multilateral liberalisation in the transport and logistics sector. It also discusses how

the barriers can be addressed in the India-EU BTIA. Specifically, it focuses on the EU’s

likely demands and India’s likely negotiating strategies and options.

In goods, India’s overall tariffs are higher than that of the EU. Since 2005 most of the

items in the transport sector that are imported from the EU (i.e., aeroplane and aircraft)

face low tariffs of only 3 per cent; however, the tariff for motor cars and motor vehicles

for personal use (including luxury cars) have a high tariff of 100 per cent. During the

survey, EU companies exporting to India pointed out that they are likely to benefit if

this is reduced either multilaterally or through the BTIA. As discussed in Section 3.4,

there are differences in technical standards between the two economies which affect

trade. The EU companies pointed out that if there is scope for enhancing co-operation

in technical standards under the BTIA, it will facilitate trade and investment.

In services, both India and the EU offered limited commitments in the transport and

logistics sector during the Uruguay Round of General Agreement on Trade in Services

(GATS) or WTO84 negotiations. During the Uruguay Round as well as in the present

Doha Round, the EU (along with countries such as Japan and China) has been a major

proponent of liberalising transport and logistics services. In 2000, the EU submitted

a proposal85 to the WTO which covered liberalisation of all modes of transport. This

proposal highlighted the need to reduce unnecessary distortive trade barriers while

preserving the quality of service, public safety and regulation. The EU also proposed

that commitments should facilitate multi-modal transportation through broad-based

commitments in auxiliary services and transport. The EU proposed that although

hard rights like traffic rights are excluded from GATS, commitments can be sought

in services such as ground-handling services, freight and mail handling, and ramp-

handling services, subject to safety, security and employment conditions. Where self-

handling by airlines is permitted, this possibility should be available to all individual

airlines on a neutral, transparent and non-discriminatory basis. This has led to a debate

on whether ground handling (which was until then treated outside the scope of the

GATS negotiations) should be covered under multilateral liberalisation. In 2005, the

84 A brief overview of GATS is given in Appendix C.

85 WTO Document S/CSS/W/41 dated 22 December 2000.


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EU together with 20 countries86 submitted a statement agreeing in principle on the

importance of taking commitments in logistics services. The logistics sector has a

wider coverage than the transport sector since it also covers services like courier

services and management consulting. The EU is also a major proponent of liberalising

allied sectors like postal and courier services in the WTO.

The EU has been an active participant in the plurilateral87 negotiations which commenced

after the Hong Kong Ministerial (December 2005). The EU along with countries such as

Australia, Chile, New Zealand, Norway and Switzerland made a request to over 22 member

countries (including India) in air transport services. The plurilateral request in air transport

services covered not only the three areas in which the Uruguay Round negotiations

concentrated (i.e., aircraft repair and maintenance services, selling and marketing of

air transport services and computer reservation systems services) but also ground-

handling services and airport operation services. This shows the EU’s strong interest in

liberalising air transport services. The EU along with countries like Japan, Mexico and

New Zealand made a plurilateral request to countries like India and the US in maritime

transport services. This request focused on securing liberalisation commitments in

international maritime freight transport, eliminating cargo reservations, FDI restrictions,

preferential treatment and nationality requirements for board members for international

freight transport, and obtaining commitments on a range of auxiliary services in

maritime transport. The request furthermore focused on additional commitments for

non-discriminatory access to port facilities and the use of multimodal transport. The

group also called for the removal of Most Favoured Nation (MFN) exemptions.

The transport sector of India witnessed significant liberalisation since the conclusion

of the Uruguay Round. Although India’s revised offer in the Doha Round dated August

24, 2005 (see Table 5.1) shows significant improvements over the Uruguay Round

commitments across a wide range of service sectors, in the transport and logistics

sector the offer shows limited improvements. It does not bind unilateral liberalisation. For

instance, in road transport there are currently no FDI restrictions, but India had not made

any offers. The gap between unilateral liberalisation and India’s revised offer in the Doha

Round shows that there is significant scope for India to broaden its commitments both

86 Australia, Canada, Chile, Djibouti, the EC, Hong Kong, China, Iceland, Japan, Korea, Liechtenstein, Mauritius, New Zealand, Nicaragua, Norway, Panama, Peru, Singapore, Switzerland, the Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu and the US (Document TN/S/W/34 dated 18 February 2005).

87 GATS negotiations are generally based on request-offer process where a country makes bilateral request to its trading partners, who after taking into account the requests from all countries make an offer. The offer is multilateral, that is, all WTO members whether the country has made a request or not benefits from it. Plurilateral negotiations began after the Hong Kong Ministerial in 2005. In this, a group of countries – the demanders make a request to another group – the target countries. While offers do not have legal binding, they nevertheless show a country’s interest to liberalise. After negotiations, the offers are sealed and they are known as commitments. Commitments have legal binding.



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in the WTO and in its bilateral agreements with the EU. The survey found that India can

offer more liberal commitments in road transport services and auxiliary services. Since

the railways is still a public monopoly, India may not liberalise this sector. EU companies

have an interest in dedicated freight corridors and containerised cargo movements in

which India has allowed private players; this segment can be liberalised under the BTIA.

The survey found that in maritime transport, India is likely to continue with the policy of

cargo reservations. Both India and EU are likely to continue with cabotage restrictions. In

allied sectors like courier services, India can undertake commitments which will ensure

that in future India will not impose FDI restrictions. However, India can adhere to other

EU demands like non-discriminatory port access and removal of FDI restrictions.

There are, however, some areas of concern. India has not liberalised the transport

sector beyond its WTO revised offers in its existing bilateral agreements, namely, the

India-Singapore Comprehensive Economic Co-operation Agreement (CECA) and India-

Korea Comprehensive Economic Partnership Agreement (CEPA). The logistics sector in

India is undergoing regulatory changes, which has created regulatory uncertainty. Indian

policymakers are not keen to undertake commitments unless the regulatory regime is in

place. India has a keen interest in supplying manpower like seafarers and port workers.

The EU offers in Mode 4 (movement88of natural persons) are limited. India would like to

use its commitments in Mode 3 (commercial presence) to gain greater market access

in Mode 4. India would also like to have better offers in Mode 1 (cross-border supply of

services) which will help the country develop as an outsourcing hub for EU companies.

The requirements for a foreign company to become a road transport operator within

the EU vary across member states; driving licence requirements and examinations also

vary. India is likely to raise this issue in the negotiations. Both Indian and EU companies

pointed out that India and the EU are not harmonised markets, and companies would

benefit from harmonisation of technical standards. Harmonisation and simplification of

customs procedures and standards will facilitate trade. The BTIA can facilitate greater

co-operation in areas like clean technologies in transport. Companies pointed out that

the government procurement agreement will increase access to each other’s market.

However, the extent of benefits will depend on the coverage of the agreement.

Overall, both Indian and European companies pointed out that increased trade due

to the BTIA will provide increased business opportunities for transport and logistics

service providers, aid the development of logistics domain knowledge and facilitate

the adoption and use of new technologies.

88 See Appendix C for the definition of different modes of services.


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Table 5.1: commitments and revised offers in Transport and Logistics:

india and the eU

courier services

india eU

MA NT MA NT

× × � �Maritime

Freight and Passenger � � � �Rental of vessels with crew � � � �Maintenance and repair of vessels � � � �Pushing and towing services × × � �Supporting services for maritime transport 89 � � � �Rental/ leasing services without operators relating to ships (excluding the services of actual international transport of cargo) � � ◊ ◊

Maritime auxiliary services

Cargo handling � � � �Storage and warehouse services � � � �Customs clearance services � � � �Container station and depot services � � � �Maritime agency services � � � �Maritime freight forwarding services � � � �air

Freight and passenger × × × ×

Rental of aircraft with crew × × � �Maintenance & Repair of aircraft � � ◊ ◊

Supporting services for air × × × ×Sales and Marketing × × ◊ ◊Computer Reservation System × × ◊ ◊

Ground handling × × � �Airport management × × � �Rental/leasing services without operators relating to aircraft × × ◊ ◊rail

Freight and passenger × × � �Pushing & Towing × × × ×Maintenance & Repair of rail transport × × ◊ ◊

Supporting services for rail × × � �road

Freight and passenger × × ◊ ◊

Rental of commercial vehicles × × � �Maintenance & Repair of road × × ◊ ◊

Supporting services for road × × � �auxiliary services for all modes

Cargo handling × × � �Storage & Warehouse × × ◊ ◊Freight transport × × ◊ ◊Pre-shipment inspection × × ◊ ◊Others × × × ×

Management consulting services � � ◊ ◊

services related to Management consulting services � � ◊ ◊

Technical testing and analysis services ◊ ◊

Source: WTO document GATS/SC/31, dated April 15, 1994; GATS/SC/42 dated April 15, 1994; WTO document TN/S/O/EEC/Rev.1, dated June 29, 2005; and WTO document TN/S/O/IND/Rev.1, dated August 24, 2005. 89

Notes: ×: No commitment; : Improvement in revised offer; ◊: No improvement in revised offer; �: No commitment in Uruguay Round but in revised offer. MA: Market Access; NT: National Treatment

89 The EU only committed in the sub-category of ‘ship agency services’, while India only committed in ‘ship broking services’.



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6. reform requirements in india


69REFORm REquIREmENTS IN INDIA

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To compete with other low-cost developing countries like China and sustain its high

growth rate, India needs to create new infrastructure and upgrade the existing

transport and logistics infrastructure. The Indian government would like a substantial

part of this investment to come from the private sector. However, the transport sector

in India suffers from a large number of barriers; unless these are addressed, India may

not get the requisite investment or the pace of investment will be slow. This section

discusses the reforms that are required to enhance the global competitiveness of the

Indian transport and logistics sector.

Transparency, good governance and a predictable operating environment are

prerequisites for investment in sectors like transport and logistics which have a long

gestation period. The approval procedures have to be simple. The transport sector is

governed by a large number of ministries, resulting in multiple clearance requirements

and regulations. There should be greater co-ordination among ministries so that there is

single-widow clearance. Instead of a piece-meal approach towards the development of

this sector by different ministries, they should work together towards development of

an integrated transport sector. The central government should also work closely with the

state governments to remove bottlenecks such as availability of land and delays in getting

state-level clearances. The government policy should encourage healthy competition.

Proper pricing of infrastructure is also essential to attract private investment.

The development of a seamless logistics chain depends on connectivity, automation,

computerisation and technological upgrading in the sector. An efficient EDI system

connecting different modes of transportation will facilitate the rapid movement of

goods. Seaports, airports, the hinterland, warehouses, etc. should be linked through

proper access roads and railways. In airports, there should be facilities for 24x7

movement of cargo between domestic and international terminals. Warehouses

should be built in areas where there are no access restrictions, and they should be

well-connected to airports, ports, etc. There should be no restrictions on movement

of cargo between Inland Container Depots (ICDs) and ports/airports.

The customs clearance process needs to be streamlined and simplified. The system

of physical checking of cargo by customs causes delays. This should be replaced by

a clearance process based on proper risk management, EDI, e-payment of duties,

single-window clearance by other agencies, etc., which will significantly reduce the

dwell time of cargo. The Customs EDI should be integrated with other agencies such

as the Drug Controllers and Wild Life Agencies so that delays are minimised.


70 REFORm REquIREmENTS IN INDIA

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With liberalisation, there is a need for proper regulation to support the growth of this

sector. In this respect, India can learn from global best practices. Outdated regulations

should be replaced and new regulations initiated faster. This will reduce operational

uncertainty and enable the country to undertake commitments in the WTO and FTAs.

Although India has a large, skilled workforce, this study found a shortage of appropriate

skills in transport and logistics services. There is a need to identify areas in which there

are skill shortages and training requirements. The different transport departments of

the government should work with educational institutes and the industry on a PPP

model to identify skill requirements and provide training.

In the case of road transport, priority should be given not only to construction but

also to maintenance. Frequent changes in concession agreements can act as a

disincentive. Taxation of commercial vehicles should be related to the potential damage

by movement on bad roads. The tax structure should be rationalised in favour of multi-

axle vehicles to encourage their use. The focus should be on use of environment-

friendly technologies and fuel conservation. The government should also emphasise

the development of proper traffic management technology, road safety measures,

parking and road-side facilities, among others. There is also a need to improve security

along highways.

Delays in inter-state movement due to multiple taxes, different state-level regulations

and product-related restrictions (such as restrictions on the movement of agricultural

commodities) reduce the benefits of creating expressways and lead to loss of fuel.

Since freight movement by trains does not face these restrictions, many of them

are unnecessary. There is a need for a process of fully computerised green channels

along highways/expressways, whereby a vehicle once cleared can pass through other

check posts without multiple checking of documents. The single Goods and Services

Tax (GST) proposed by the government will streamline the tax structure but will not

reduce the wait time, since there are other regulations such as octroi in certain cities

of Maharashtra which will continue to exist. Replacement of manual inspection,

computerisation and 24x7 manning of check posts will reduce some of the delays.

The government should remove multiple entry forms or road permits for different

states as these are irrelevant with the implementation of GST. Different taxes such as

road tax and goods tax on vehicles should be amalgamated into a single tax to reduce

time and costs of tax collection. Red tape, corruption and bribes at inter-state borders

should be eliminated.


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The monopoly position of the government in railways restricts investment. It leads

to delays in awarding contracts, a non-competitive operating environment for private

players and price distortions, among others. The railways need to separate commercial

and social activities, and then privatise its commercial services. The government

should expedite the construction of dedicated freight corridors and private players

should be given autonomy in their respective dedicated freight corridors.

In many cities, airports have a monopoly, i.e., there is a single airport. Therefore, there

is a need for a regulator once the sector is privatised. The privatisation experience

in India has been mixed. Airport user charges have risen, and often private players

do not provide sufficient storage for freight in their master plans. The master plans

should be carefully evaluated before the project is sanctioned. Separate land should

be demarcated for cargo movement and storage facilities.

The infrastructure, technology and machinery used in Indian ports should be upgraded.

There is a need to increase the depth and the number of berths depending on cargo

flows. The equipment has to be modernised and labour has to be trained to handle

it. There is also a need for labour reforms in Indian ports. In the case of shipping,

the policy of cargo reservation needs to be evaluated. The focus should be on a

competitive shipping sector rather than the promotion of national flag ships. For this

the government should also ensure there are no cartels, conferences or other forms

of anti-competitive practices.

The construction sector will benefit from a transparent procurement process where

the concession agreements are strictly adhered to and the process of collection of

tariffs etc. are clearly defined. Simplification of the labour laws and availability of power

will benefit the auto-component and automobile industry.


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7. conclusion and the way forward


73CONCLuSION AND THE wAy FORwARD

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The Indian transport and logistics sector is growing at a rapid pace. Following

liberalisation measures since the 1990s, the sector has been opened up, allowing

enhanced participation by private players from within and outside the country.

Increased economic activity, trade flows and collaboration have over the years resulted

in various structural changes in the sector which continues to evolve and modernise.

The EU, on the other hand, has a well-developed transport and logistics sector, and

is home to some of the largest and most established companies in the world. With

increased growth prospects in India in the past two decades, EU companies have also

shown a keen interest in establishing a presence in the country. This paper attempts

to provide an overview of the Indian transport and logistics market and focuses on the

growth and prospects for trade, investment and collaboration between India and the

EU in this sector. However, various barriers affect the operations of EU companies in

India, which have been identified in the paper based on a primary survey.

The study found that companies of EU origin are significant providers of FDI and

technology transfers to India. They have established a presence in India in almost

all the segments through various modes of operation. Most companies operate in

areas such as freight forwarding, construction and consultancy and automobile/auto-

component manufacturing and foresee significant future growth prospects. The major

strengths of EU companies lie in their wide networks, global reach and access to

information. They have well-defined standards and processes in place, but lack an

understanding of the Indian market.

It was found that there is scope for increased India-EU collaboration in maritime

auxiliary services, cold storage, cargo management, construction and maintenance,

automobile manufacturing, and clean-fuel technology transfers. In the long run,

as infrastructure develops, greater opportunities for tie-ups are likely to emerge in

3PL/ 4PL services, toll and traffic management, parking management, and signalling

services, among others.

The barriers identified in the study were found to be linked to the sectors and forms

of operation of the companies. Broadly, infrastructure-related hurdles, shortage of

skilled manpower, a cumbersome regulatory structure and corruption in government

agencies were the most commonly identified constraints to trade between India and

EU. In some cases, however, barriers for one type of company could be opportunities

for others.


74 CONCLuSION AND THE wAy FORwARD

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The EC has been a demandeur in GATS to liberalise the transport and logistics services

sector in emerging economies and its bilateral trade-investment agreements. It had

also made significant commitments in its WTO Revised Offer in the year 2005. In

comparison, India did not take substantial commitments in its WTO Revised Offer

in the same year. However, India’s FDI regime is currently far more liberal and it is

in a position to undertake greater commitments in segments such as port access,

containerised cargo movement, road transport and auxiliary services. These can

be offered under the proposed BTIA which is currently being negotiated between

India and the EU. Market access restrictions in rail transport and cargo reservations

in maritime transport are likely to stay. However, for most barriers faced by EU

companies in the sector, India needs to initiate domestic reforms. These should

involve streamlining approval processes and customs procedures and transparency in

government procedures, regulatory reforms, fiscal and labour reforms, among others.


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appendix a

Table a.1: organisations and acts relevant to indian Logistics sector 90

Ministries/departments some important acts

road Transport

central Level

Ministry of Road Transport and Highways (MORTH)

Function: Development of road transport infrastructure and national highways; and overall regulation of freight road transport

�� Multimodal Transportation 90 of Goods Act, 1993 provides a framework for governing issuance, delivery and transfer for multimodal transportation of goods.

�� Motor Vehicles Act, 1988 provides regulations related all aspects of motor vehicles.

�� Central Motor Vehicle Rules, 1989 have been amended from time to time to meet the emerging requirement (amended in 2004 and 2005)

�� National Highways Act, 1956 provides a framework for declaration of highways as being national highways and for matters connected with it.

�� National Highways Authority of India Act, 1988 was enacted for the establishment of an authority for the development, maintenance and management of the national highways and for matters connected to it.

�� Carriage by Road Act, 2007 provides a framework for the regulation of common carriers, limitation of their liability for loss or damage to such goods and when implemented would repeal the Carriers Act, 1865.

Ministry of Urban Development

Function: Planning and implementation of urban transport policy

National Urban Transport Policy

National Highway Authority of India (NHAI)

Function: Development and maintenance of national highways in the country

�� National Highways Act, 1956

�� National Highways Authority of India Act, 1988

90 Multimodal transportation is defined as the carriage of goods by at least two different modes of transport under a multimodal transport contract, from the place of acceptance of goods in India to a place of delivery of goods outside India.


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state Level

State Transport Departments

Function: Development and maintenance of state highways in the country. Licences and controls all road vehicles, inspection of vehicles, fixes motor vehicle tax rates.

�� Carriers Act, 1865 enabled common carriers to limit the liability for the loss of or damage to property delivered to them to be carried but also to declare their liability for loss of or damage to such property occasioned by the negligence or criminal acts of themselves, their servants or agents.

�� Motor Vehicles Act, 1988

�� Carriage by Road Act, 2007

State Road Transport Undertaking

Function: Operation of bus services.

Road Transport Corporations Act, 1950 provides a framework for the incorporation and regulation of Road Transport Corporations.

Urban Development Authority State Development Acts

Public Works Department (PWD) is responsible for construction and repair of state roads.

Municipal Corporation of India (MCD) is responsible for construction and repair of smaller roads, road signage, traffic lights, licensing and control of non-motorised vehicles, clearing of encroachments and land-use planning.

Local Level

Traffic Police

Function: Enforcement of traffic laws and prosecuting violators

State Police Acts

ports, shipping and inland Water Transport

central Level

Ministry of Shipping

Function: Co-ordination of various activities related to ports, shipping and inland water transport

�� Indian Ports Act, 1908 lays down rules related to safety of shipping and conservation of ports for the entire port sector; and regulates matters related to administration of port duties, pilotage and other charges.

�� Major Port Trusts Act, 1963 enacted for the establishment of port authorities for major ports.

�� Merchant Shipping Act, 1958 enacted for the establishment of a National Shipping


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Board and a Shipping Development Fund, and to amend and consolidate the law relating to merchant shipping.

�� Inland Vessels Act 1917 consolidates the enactments relating to inland vessels, which have been defined as mechanically propelled vessels that ordinarily ply on any inland water.

�� Costing Vessels Act, 1838 lays down rules regarding costing with respect to vessels belonging to any citizen of India and employed on the coast of any State or part of a State, or in trading coastwise, and also with respect to fishing vessels and harbour craft.

�� Inland Water Ways Authority of India Act, 1985 enacted for the establishment of a regulatory authority for inland waterways.

�� Shipping Bill and Bill of Export Regulations, 1991 are regulations requiring the exporter to present a bill of export and shipping bill containing such details as provided by the regulations.

�� Indian Carriage of Goods by Sea Act, 1925 regulates the carriage of goods by sea in ships from any port in India to any port outside India, and also imposes certain responsibilities and liabilities, and confers certain rights and immunities upon the carrier.

�� Multimodal Transportation of Goods Act, 1933

�� The Dock Workers (Regulation of Employment Act), 1948 provides the regulatory framework for employment of dock workers.

�� The Seaman Provident Fund Act, 1966 provides for establishment of a provident fund for seamen.

National Shipping Board is an advisory body to the Ministry

Merchant Shipping Act, 1958


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Director General, Shipping (DGS)

Function: Implementation of provisions of the Merchant Shipping Act (1958), of various international conventions relating to safety, and mandatory requirements under the International Maritime Organisation

Merchant Shipping Act, 1958

Function: Provides general aid to Mariner Navigation along the Indian coast.

Lighthouse Act, 1927 lays down the regulations for maintenance and control of lighthouses.

Inland Water Way Authority of India

Function: A regulatory authority responsible for development of national waterways for the purposes of shipping and navigation.

Inland Waterways Authority of India Act, 1985

Tariff Authority for Major Ports (TAMP)

Function: A regulatory authority responsible for setting up tariffs for major ports; lays down the institutional framework for the major ports in India.

Major Ports Trust Act, 1963

state Level

Port Trusts

Function: Managing daily activities of the major individual ports in the country

�� The Indian Ports Act, 1908

�� Major Ports Trusts Act, 1963

Maritime States Development Council (MSDC)

Function: Development of all ports – major and minor

State Maritime Development Corporation Ltd.

Function: Development of waterways other than national waterways for the purposes of shipping and navigation

civil aviation

central Level

Ministry of Civil Aviation

Function: Planning and development of infrastructure for regulating air traffic

�� Aircraft Act, 1934 lays down provisions to control the manufacture, possession, use, operation, sale, import and export of aircraft.

�� Air Corporation Act, 1953 enacted to the establishment of Air Corporations for the operation of air transport services.

�� Aircraft Rules, 1937 have been amended from time to time to meet emerging requirements (10th amendment in 2009)


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�� Carriage by Air Act, 1972 was enacted to give effect to the Convention For the Unification of Certain Rules Relating to International Carriage by Air that was signed at Warsaw on October 12, 1929 and was amended by the Hague Protocol of September 28, 1955.

Director General of Civil AviationFunction: Performs regulatory functions

Bureau of Civil Aviation Security (BCAS)Function: A monitoring authority of security standards, rules and regulations

other related Ministries

Airport Authority of India (AAI)Function: Provides infrastructure and facility for air traffic and is also responsible for maintaining domestic and international airports and civil enclaves at defence airports

Airport Authority of India Act, 1994 enacted for the establishment of Airport Authority of India for the better administration and cohesive management of airports.

Airports Economic Regulatory Authority (AERA)Function: A regulatory authority for determining tariffs, development fees, passenger services fees, and to monitor the set performance standards relating to quality, continuity and reliability of service.

Airports Economic Regulatory Authority of India Act, 2008 enacted for the establishment of a regulatory authority to regulate tariff and other charges for the aeronautical services rendered at airports and to monitor the performance standards of airports.

railways

central Level

Ministry of RailwaysFunction: Operation of urban rail transit systems; planning and development of railway infrastructure

Indian Railways Act, 1989 lays down the rules relating to railways

Rail Land Development AuthorityFunction: Development of vacant railway land for commercial use for the purpose of generating revenue by non-tariff measures.

Indian Railways Act, 1989

other related Ministries

central Level

Ministry of Petroleum and Natural GasFunction: Regulation of prices and quality of transportation fuels

�� The Petroleum Act, 1934 consolidates the law relating to the import, transport, storage, production, refining and blending of petroleum.

�� The Oil Fields Act, 1948 lays down the rules for regulating oilfields and for the development of mineral oil resources.

�� The Petroleum Rules, 1976


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Ministry for Environment and Forests

Function: Power to allow any area to be constituted as a reserved forest, protected forest/village forest or a “protected area”, namely, a national park, wildlife sanctuary, tiger reserve or community conservation area.

�� The Indian Forests Act, 1927 consolidates the law relating to forests, the transit of forest produce and the duty leviable on timber and other forest produce.

�� Wild Life (Protection) Act, 1972 established schedules of protected plant and animal species; hunting or harvesting these species was largely outlawed.

Ministry of Consumer Affairs, Food and Public Distribution

Function: Makes warehouse receipts issued by accredited agencies negotiable, enabling farmers to trade their commodities without carrying them physically

�� Essential Commodities Act, 1955 provides for the regulation and control of production, distribution and pricing of commodities which are declared as essential for maintaining or increasing supplies or for securing their equitable distribution and availability at fair prices.

�� Warehousing (Development and Regulation) Act, 2007 enacted for the development and regulation of warehouses, negotiability of warehouse receipts, and establishment of a Warehousing Development and Regulatory Authority

Ministry of Finance (Department of Revenue)

Function: Deals with the formulation of policy concerning levy and collection of customs and central excise duties, prevention of smuggling and administration of matters relating to customs

�� The Customs Act, 1962, lays down the laws relating to customs.

�� The Customs Tariff Act, 1975 consolidates laws relating to customs duties.

�� Central Sales Tax Act, 1956 formulates rules to provide levy, collection and distribution of taxes on sales of goods in state or intra-state level.

Competition Commission of India (CCI)

Function: Treatment of anti-competitive agreements and abuse of dominant position

Competition Act, 2002 enacted for the establishment of a Commission to prevent practices having an adverse effect on competition, to promote and sustain competition in markets, to protect the interests of consumers and to ensure freedom of trade carried on by other participants in markets.

state Level

Department of Environment

Function: Monitor air quality

Air (Prevention and Control of Pollution) Act, 1981

Sales Tax Authorities Central Sales Tax Act, 1956

Source: Compiled from ADB (2007) and websites of various Indian ministries.


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appendix B

Table B.1: hs code for Transportation equipment

86raiLWaY or TraMWaY LocoMoTiVes, roLLiNg-sTocK aNd parTs Thereof; raiLWaY or TraMWaY TracK fiXTUres aNd fiTTiNgs aNd parTs Thereof; MechaNicaL

8601rail locomotives powered from external source of electricity/by electric accumulators

860110 Rail locomotives powered from an external source of electricity

86011000 Rail locomotives powered from an external source of electricity

860120 Rail locomotives powered by electric accumulators

86012000 Rail locomotives powered by electric accumulators

8602 other rail locomotives; locomotive tenders

860210 Diesel-electric locomotives

86021000 Diesel-electric locomotives

860290 Rail locomotives excl those of 8601&860210

86029010 Railway locomotives; steam & tenders thereof

86029090 Other locomotive tenders

8603self-propelled railway/tramway coaches, vans & trucks, excluding those of heading no. 8604

860310 Coaches propelled from external source of electricity

86031000 Coaches propelled from external source of electricity

860390 Other railway/tramway coaches etc, self-propelled

86039000 Other railway/tramway coaches etc, self-propelled

8604railway or tramway maintenance or service vehicles, whether or not self-propelled (for example, workshops, cranes, ballast tampers, track liners, testing coaches and track inspection vehicles)

860400Railway or tramway maintenance or service vehicles, whether or not self-propelled (for example, workshops, cranes, ballast tampers, track liners, testing coaches and track inspection vehicles)

86040000Railway or tramway maintenance or service vehicles, whether or not self-propelled (for example, workshops, cranes, ballast tampers, track liners, testing coaches and track inspection vehicles)

8605railway or tramway passenger coaches, luggage vans, post office coaches & other special railways or tramways not self-propelled (excluding items of 8604)

860500Railway or tramway passenger coaches, luggage vans, post office coaches & other special railways or tramways not self-propelled (excluding items of 8604)


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86050000Railway or tramway passenger coaches, luggage vans, post office coaches & other special railways or tramways not self-propelled (excluding items of 8604)

8606 railway or tramway goods vans & wagons, not self-propelled

860610 Tank wagons & the like

86061010 4-wheeler tank wagons pay-load > 23 tonnes

86061020 8-wheeler tank wagons pay-load < = 60 tonnes

86061090 Other tank wagons & the like

860620 Insulated or refrigerated vans and wagons, other than those of sub-heading no. 860610

86062000 Insulated or refrigerated vans and wagons, other than those of sub-heading no. 860610

860630 Self-discharging vans and wagons, other than those of sub-heading no. 860610/860620

86063000 Self-discharging vans and wagons, other than those of sub-heading no. 860610/860620

860691 Other vans & wagons, covered & closed

86069110 Meter gauge 8-wheeler covered wagons of pay-load < = 38 tonnes

86069120 Broad gauge 8-wheeler covered wagons of pay-load < = 60 tonnes

86069190 Other vans & wagons, covered & closed

860692 Other railway/tramway goods vans, open, with non-removable sides of a height>60cm,nt self-propelled

86069210 Bogie eight wheeler wagons of pay-load < = 60 tonnes

86069220 Broad gauges bogie eight wheeler wagons of pay-load > 60 tonnes but < = 67 tonnes

86069290 Other railway/tramway goods vans, open

860699 Other railway/tramway goods vans, not self-propelled

86069900 Other railway/tramway goods vans, not self-propelled

8607 parts of railway/tramway locomotives/rolling-stock

860711 Driving bogies & bissel-bogies

86071100 Driving bogies & bissel-bogies

860712 Other bogies & bissel-bogies

86071200 Other bogies & bissel-bogies

860719 Other(axles, wheels etc.),including parts

86071910 Axles, wheels etc. for railway wagons & carriages

86071920 Axle boxes (lubricating/gears box) for railways

86071930 Axles, wheels etc. for locomotives

86071990 Other parts of axles and wheels for railway wagons and carriages


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860721 Air brakes & parts thereof

86072100 Air brakes & parts thereof

860729 Other brakes & parts thereof

86072900 Other brakes & parts thereof

860730 Hooks & other coupling devices, Buffers & parts

86073010 Buffers for rolling stock, devices for railway

86073090 Others

860791 Parts of locomotives

86079100 Parts of locomotives

860799 Other parts of other coaches/carriages

86079910 Parts of coach for railway

86079920 Parts of tramway

86079930 Hydraulic shock absorbers for bogies

86079990 Parts of railway, n.e.s.

8608railway or tramway track fixtures & fittings; mechanical signalling, safety or traffic control equipment for roads, inland waterways etc. parts of the above

860800 Railway or tramway track fixtures & fittings; mechanical signalling, safety or traffic control equipment for roads, inland waterways etc. parts of the above

86080010 Railway & tramway track fixtures & fittings

86080020 Mechanical equipment, not electricity powered for signalling/controlling road rail/other vehicles, ships/aircraft

86080030 Other traffic control equipment for railways

86080040 Other traffic control equipment for roads, inland waterways, ports, airports

86080090 Other

8609containers specially designed &equipped for carriage by one/more modes of transport

860900 Containers specially designed &equipped for carriage by one/more modes of transport

86090000 Containers specially designed &equipped for carriage by one/more modes of transport

87VehicLes oTher ThaN raiLWaY or TraMWaY roLLiNg sTocK, aNd parTs aNd accessories Thereof

8701 Tractors(excl tractors of heading no. 8709)

870110 Pedestrian controlled tractors

87011000 Pedestrian controlled tractors

870120 Road tractors for semi-trailers

87012010 Road tractors for semi-trailers of engine capacity < = 1800 cc


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87012090 Other road tractors for semi-trailers

870130 Track-laying tractors

87013011 Garden tractors of engine capacity < = 1800 cc

87013019 Other garden tractors

87013091 Other track-laying tractors of engine capacity < = 1800 cc

87013099 Other track-laying tractors

870190 Other tractors

87019010 Other tractors of engine capacity < = 1800 cc

87019090 Other tractor

8702 public-transport type passenger motor vehicles

870210 Motor vehicles with compression-ignition internal combustion piston engine (diesel or semi-diesel)

87021011 Integrated monologue vehicles (< = 13 persons) with combustion-ignition internal combustion piston engine

87021012 AC vehicles (< = 13 persons) with combustion-ignition internal combustion piston engine

87021019 Other vehicles(< = 13 persons) with combustion-ignition internal combustion piston engine

87021091 Integrate monologue vehicles(>13 persons) with combustion-ignition internal combustion piston engine

87021092 AC vehicles(>13 persons) with combustion-ignition internal combustion piston engine

87021099 Other vehicles(>13 persons) with combustion-ignition internal combustion piston engine

870290 Other motor vehicles pub-transport type

87029011 Other integrated monocoque vehicles (< = 13 persons)

87029012 Other AC vehicles(< = 13 persons)

87029013 Other electrically operated vehicles(< = 13 persons)

87029019 Other vehicles public transport type(< = 13 persons)

87029020 Electrically operated vehicles n.e.s.

87029091 Other integrated monocoque vehicles(>13 persons)

87029092 Other AC vehicles (>13 persons)

87029099 Other vehicles pub-transport type(>13 persons)

8703Motor cars and other motor vehicles principally designed for the transport of persons (other than those of heading 8702), including racing cars etc.

870310 Vehicles for travelling on snow; golf car & the like

87031010 Electrically operated vehicle for travelling on snow; golf car & the like


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87031090 Other vehicle for travelling on snow; golf car & the like

870321 Vehicles with spark-ignition internal combustion reciprocating piston engine of cylinder capacity< = 1000 cc

87032110 Vehicle with cylinder capacity< = 1000 principally designed for the transport of >7 persons including driver, with spark-ignition

87032120 Three-wheeled vehicles with cylinder capacity< = 1000 with spark-ignition

87032191 Motor car with cylinder capacity< = 1000 with spark-ignition

87032192 Specialised transport vehicles(e.g. ambulances, prison vans, hearses) with cylinder capacity< = 1000 with spark-ignition

87032199 Other vehicle with spark-ignition internal combustion reciprocating piston engine of cylinder capacity<1000 cc

870322 Vehicles with spark-ignition internal combustion reciprocating piston engine of cylinder capacity>1000 cc but not>1500 cc

87032210 Vehicle with cylinder capacity> = 1000 cc but < 1500 cc principally designed for the transport of >7 persons including driver; with spark-ignition

87032220 Specialised transport vehicles(e.g. ambulances, prison vans, hearses) with cylinder capacity> = 1000 cc but < 1500 cc

87032230 Three-wheeled vehicles with spark-ignition with cylinder capacity> = 1000 cc but < 1500 cc

87032291 Motor car with cylinder capacity> = 1000 cc but < 1500 cc with spark-ignition

87032299 Other vehicle with cylinder capacity> = 1000 cc but <1500 cc with spark-ignition

870323 Vehicles with spark-ignition internal combustion reciprocating engine of a cylinder capacity>1500 cc but< = 3000 cc

87032310 Vehicle with cylinder capacity> = 1500 cc but < 3000 cc principally designed for the transport of >7 persons including driver; with spark-ignition

87032320 Three-wheeled vehicles with spark-ignition with cylinder capacity> = 1500 cc but < 3000 cc

87032391 Motor car with cylinder capacity> = 1500 cc but <3000 cc with spark-ignition

87032392 Specialised transport vehicles(e.g. ambulances, prison vans, hearses a cylinder capacity>1500 cc but< = 3000 cc

87032399 Other vehicle with cylinder capacity> = 1500 cc but <3000 cc with spark-ignition

870324 Vehicles with spark-ignition internal combustion reciprocating piston engine of cylinder capacity>3000 cc

87032410 Vehicle with cylinder capacity> = 3000 principally designed for the transport of >7 persons including driver; with spark-ignition

87032420 Three-wheeled vehicles with spark-ignition with cylinder capacity> = 3000

87032491 Motor car with cylinder capacity> = 3000 cc with spark-ignition

87032492 Specialised transport vehicles(e.g. ambulances, prison vans, hearses with cylinder capacity> = 3000


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87032499 Other vehicle with cylinder capacity> = 3000 cc with spark-ignition

870331 Other vehicles, with compression ignition internal combustion piston engine(diesel/semi-diesel), of a cylinder capacity< = 1500 cc

87033110 Vehicles, with compression ignition with cylinder capacity < 1500 cc & principally designed for the

87033120 Three-wheeled vehicles with compression ignition with cylinder capacity < 1500 cc

87033191 Motor cars with compression ignition with cylinder capacity <1500 cc

87033192 Specialised transport vehicles(e.g. ambulances)prison vans and hearses with compression ignition with cylinder capacity <1500 cc

87033199 Other vehicles, with compression ignition internal combustion piston engine(diesel/semi-diesel), of a cylinder capacity< = 1500 cc

870332 Vehicles, with compression ignition internal combustion piston with cylinder capacity>1500 cc but< = 2500 cc

87033210 Vehicles, with compression ignition cylinder capacity>1500 c but < = 2500 cc principally designed for the>7 persons including driver

87033220 Three-wheeled vehicles with compression ignition with cylinder capacity>1500 cc but< = 2500 cc

87033291 Motor car cylinder capacity>1500 cc but< = 2500 cc with compression ignition

87033292 Specialised transport vehicles, ambulances, hearses etc with compression ignition capacity>1500 cc but< = 2500 cc

87033299 Other vehicles, with compression ignition internal combustion piston with cylinder capacity>1500 cc but< = 2500 cc

870333 Vehicles, with compression ignition internal combustion piston engine of cylinder capacity>2500 cc

87033310 Vehicles, with compression ignition cylinder capacity>2500c principally designed for the >7 persons including driver

87033320 Three-wheeled vehicles with compression ignition with cylinder capacity>2500 cc

87033391 Motor car with cylinder capacity>2500 cc with compression ignition

87033392 Specialised transport vehicles (ambulances, hearses etc) with compression ignition with cylinder capacity>2500 cc

87033399 Other vehicles, with compression ignition internal combustion with cylinder capacity>2500 cc

870390 Other motor cars & motor vehicles principally for the transport of persons, including station wagon etc

87039010 Other motor cars & motor vehicles principally for the transport of persons, including station wagon etc electrically operated

87039090 Other motor cars & motor vehicles principally for the transport of persons, including station wagon etc

8704 Motor vehicles for transport of goods


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870410 Dumpers designed for off-highway use

87041010 Dumpers designed for off-highway use with net wt >8 tons & maximum pay-load > = 10 tons

87041090 Other dumpers designed for off-highway use

870421 Goods vehicles, with combustion-ignition internal combustion engine(diesel/semi diesel), g.v.w.< = 5 ton

87042110 Refrigerated goods vehicles, with combustion-ignition internal combustion piston engine with g.v.w. < = 5 ton

87042120 3-wheeler goods vehicles, with combustion-ignition internal combustion piston engine with g.v.w. < = 5 ton

87042190 Other goods vehicles, with combustion-ignition internal combustion piston engine with g.v.w. < = 5 ton

870422 Goods vehicles, with combustion-ignition internal combustion g.v.w.>5 tons but < = 20 tons

87042211 Refrigerated goods vehicles, with combustion-ignition internal combustion piston engine with g.v.w.>5 tons but < = 20 tons:lorry & truck

87042219 3-wheeler goods vehicles, with combustion-ignition internal combustion piston engine with g.v.w.>5 tons but < = 20 tons: lorry & truck

87042290 Other goods vehicles, with combustion-ignition internal combustion piston engine with g.v.w.>5 tons but < = 20 tons: other vehicles

870423 Motor vehicles with combustion-ignition internal combustion piston engine (diesel etc), g.v.w.>20 tons

87042311 Refrigerated goods vehicles, with combustion-ignition internal combustion piston engine with g.v.w.>20 tons: lorry & truck

87042319 3-wheeler goods vehicles, with combustion-ignition internal combustion piston engine with g.v.w.>20 tons: lorry & truck

87042390 Other goods vehicles, with combustion-ignition internal combustion piston engine with g.v.w.>20 tons: other vehicles

870431 Motor vehicles, with spark-ignition internal combustion piston engine with g.v.w. not exceeding 5 tons

87043110 Refrigerated goods vehicles, with spark-ignition internal combustion piston engine with g.v.w. < = 5 ton: lorry & truck

87043120 3-wheeler goods vehicles, with spark-ignition internal combustion piston engine with g.v.w. < = 5 ton: lorry & truck

87043190 Other goods vehicles, with spark-ignition internal combustion piston engine with g.v.w. < = 5 ton: other vehicles

870432 Motor vehicles, with spark-ignition internal combustion piston engine, g.v.w.>5 tons

87043211 Refrigerated goods vehicles, with spark-ignition internal combustion piston engine with g.v.w. < = 5 ton: lorry & truck

87043219 Other goods vehicles, with spark-ignition internal combustion piston engine with g.v.w. < = 5 ton: lorry & truck


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87043290 Other goods vehicles, with spark-ignition internal combustion piston engine with g.v.w. < = 5 ton: other vehicles

870490 Other motor vehicles for transport of goods

87049011 Other refrigerated motor vehicles for transport of goods: lorry & truck

87049012 Other electrically operated motor vehicles for transported goods: lorry & truck

87049019 Other type of other motor vehicles for transport of goods: lorry & truck

87049090 Other motor vehicles for transport of goods n.e.s.

8705special purpose motor vehicles (e.g. breakdown lorries, crane lorries, fire-fighting vehicles, concrete mixture lorries, road sweeper etc)

870510 Crane lorries

87051000 Crane lorries

870520 Mobile drilling derricks

87052000 Mobile drilling derricks

870530 Fire fighting vehicles

87053000 Fire fighting vehicles

870540 Concrete-mixer lorries

87054000 Concrete-mixer lorries

870590 Other special purpose motor vehicles

87059000 Other special purpose motor vehicles

8706 Chassis fitted with engines, for motor vehicles of headings nos 8701 to 8705

870600 Chassis fitted with engines, for motor vehicles of headings nos 8701 to 8705

87060011 Chassis for tractors with engine capacity < = 1800 cc

87060019 Chassis for other tractors

87060021 Chassis for vehicles heading 8702 (< = 13 persons)

87060029 Chassis for vehicles heading 8702 (>13 persons)

87060031 Chassis for 3-wheeled vehicles heading 8703

87060039 Chassis for vehicles heading 8703 except 3- wheeled

87060041 Chassis for 3-wheeled vehicles heading 8704

87060042 Chassis for vehicles heading 8704 except petrol driven

87060043 Chassis for dumpers heading 8704

87060049 Chassis for other vehicles heading 8704

87060050 Chassis for motor vehicles heading 8705

8707Bodies(including cabs), for the motor vehicles of headings nos 8701 to 8705

870710 Bodies for vehicles of hdg no 8703

87071000 Bodies for vehicles of hdg no 8703


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870790 Other bodies

87079000 Other bodies

8708parts and accessories of the motor vehicles of headings nos 8701 to 8705

870810 Bumpers & parts thereof

87081010 Bumpers etc for tractors

87081090 Bumpers etc for other vehicles

870821 Safety seat belts

87082100 Safety seat belts

870829 Other parts & accessories of bodies (incl cabs)

87082900 Other parts & accessories of bodies (incl cabs)

870831 Mounted brake linings

87083100 Mounted brake linings

870839 Other brakes & servo-brakes & parts thereof

87083900 Other brakes & servo-brakes & parts thereof

870840 Gear boxes

87084000 Gear boxes

870850 Drive axles with differential w/n provided with other transmission components

87085000 Drive axles with differential w/n provided with other transmission components

870860 Non-driving axles & parts thereof

87086000 Non-driving axles & parts thereof

870870 Road wheels & parts & accessories thereof

87087000 Road wheels & parts & accessories thereof

870880 Suspension shock absorbers

87088000 Suspension shock absorbers

870891 Radiators

87089100 Radiators

870892 Silencers & exhaust pipes

87089200 Silencers & exhaust pipes

870893 Clutches & parts thereof

87089300 Clutches & parts thereof

870894 Steering wheels, steering columns and steering boxes

87089400 Steering wheels, steering columns and steering boxes

870899 Other parts & accessories of vehicles of hdg 8701-8705


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87089900 Other parts & accessories of vehicles of hdg 8701-8705

8709Works trucks, used in factories, dock area/airport etc for shorter distance transport of goods; tractors used on railway platforms; parts of the above

870911 Electrical vehicles of heading 8709

87091100 Electrical vehicles of heading 8709

870919 Other vehicles of heading 8709

87091900 Other vehicles of heading 8709

870990 Parts of the vehicles of hdg 8709

87099000 Parts of the vehicles of hdg 8709

8710Tanks & other armoured fighting vehicles, motorised w/n fitted with weapons & parts of such vehicles

871000 Tanks & other armoured fighting vehicles motorised, w/n fitted with weapons & parts of such vehicles

87100000 Tanks & other armoured fighting vehicles, mortised, w/n fitted with weapons & parts of such vehicles

8711Motorcycles (including mopeds) & cycles fitted with auxiliary motor, w/n with side-cars; side-cars

871110 Motor cycle etc with reciprocating internal combustion piston engine of cylinder capacity< = 50 cc

87111010 Moped (auto cycles) with cylinder capacity < = 50 cc

87111020 Motorised cycles with cylinder capacity < = 50 cc

87111090 Other motor cycle etc with reciprocating internal combustion piston engine of cylinder capacity< = 50 cc

871120 Motor cycle etc with reciprocating internal combustion piston engine of cylinder capacity>50 cc to 250 cc

87112011 Scooters with cylinder capacity >50 but < = 75 cc

87112019 Scooters with cylinder capacity >75 but< = 250 cc

87112021 Motor cycle with cylinder capacity >50 but < = 75 c

87112029 Motor cycle with cylinder capacity >75 but< = 250 cc

87112031 Mopeds with cylinder capacity >50 but < = 75 cc

87112039 Mopeds with cylinder capacity >75 but< = 250 cc

87112091 Other vehicle with cylinder capacity >50 but < = 75 cc

87112099 Other vehicle with cylinder capacity >75 but< = 250 cc

871130 Motor cycle etc reciprocating internal combustion piston engine of cylinder cap>250 c to 500 cc

87113010 Scooters with cylinder capacity >250 but< = 500 cc

87113020 Motor cycles with cylinder capacity >250 but< = 500 cc

87113090 Other vehicle with cylinder capacity >250 but< = 500 cc


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871140 Motor cycle etc with reciprocating internal combustion piston engine of cylinder capacity>500 cc to 800 cc

87114010 Motor cycles >500 but < = 800 cc

87114090 Other vehicle with cylinder capacity >500 but < = 800 cc

871150 Motor cycle etc with reciprocating internal combustion piston engine of cylinder capacity>800 cc

87115000 Motor cycle etc with reciprocating internal combustion piston engine of cylinder capacity>800 cc

871190 Other motor cycle etc; side cars

87119010 Side cars

87119091 Electrically operated other cars

87119099 Other cars

8713 invalid carriages, w/n motorised/otherwise mechanically propelled

871310 Invalid carriages not mechanically propelled

87131010 Wheel chairs for invalid not mechanically propelled

87131090 Other invalid carriages not mechanically propelled

871390 Other invalid carriages

87139010 Wheel chairs for invalid mechanically propelled

87139090 Other invalid carriages mechanically propelled

8714 parts & accessories of vehicles of hdg 8711-8713

871411 Saddles of motor cycles (incl moped)

87141100 Saddles of motor cycles (incl moped)

871419 Other parts & accessories of motor cycles (incl moped)

87141900 Other parts & accessories of motor cycles (incl moped)

871420 Parts & accessories of invalid carriages

87142010 Motorcycles parts not mechanically propelled

87142020 Invalid cargo parts not mechanically propelled

87142090 Other

871491 Frames, forks & parts thereof

87149100 Frames, forks & parts thereof

871494 Brakes, incl coaster braking hubs & hub brakes & parts thereof

87149400 Brakes, incl coaster braking hubs & hub brakes & parts thereof

871496 Pedals & crank-gear & parts thereof

87149600 Pedals & crank-gear & parts thereof

8716Trailers & semi-trailers; other vehicles, not mechanically propelled; parts thereof

871610 Trailers & semi-trailers of caravan type


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87161000 Trailers & semi-trailers of caravan type

871620 Self-loading or self-unloading trailers & semi-trailers for agricultural purposes

87162000 Self-loading or self-unloading trailers & semi-trailers for agricultural purposes

871631 Tanker trailers & tanker semi-trailers

87163100 Tanker trailers & tanker semi-trailers

871639 Other trailers & semi-trailers for transport of goods

87163900 Other trailers & semi-trailers for transport of goods

871640 Other trailers & semi-trailers

87164000 Other trailers & semi-trailers

871680 Other vehicles of chapter 87, n.e.s.

87168010 Hand propelled vehicles (e.g. hand carts, rickshaws etc)

87168020 Animal drawn vehicles

87168090 Other vehicles of chapter 87, n.e.s.

871690 Parts & accessories of vehicles of hdg 8716

87169010 Parts & accessories of trailers

87169090 Parts & accessories of other vehicle not mechanically propelled

88 aircrafT, spacecrafT, aNd parTs Thereof

8801 Balloons & dirigibles; gliders, hang gliders & other non-powered aircraft

880110 Gliders & hang gliders

88011000 Gliders & hang gliders

880190 Other(balloons, dirigibles, aircraft etc)

88019010 Balloons

88019090 Others

8802other aircraft (e.g. helicopters, aeroplanes); spacecraft (including satellites & suborbital) & spacecraft launch vehicles

880211 Helicopters of an unladen wt< = 2000 kg

88021100 Helicopters of an unladen wt< = 2000 kg

880212 Helicopters of an unladen wt> 2000 kg

88021200 Helicopters of an unladen wt> 2000 kg

880220 Aeroplanes & other aircraft, of an unlade weight not exceeding 2000 kg

88022000 Aeroplanes & other aircraft, of an unlade weight not exceeding 2000 kg

880230 Aeroplanes & other aircraft, of an unladen weight >2000 kg but not exceeding 15000 kg

88023000 Aeroplanes & other aircraft, of an unladen weight >2000 kg but not exceeding 15000 kg

880240 Aeroplanes & other aircraft, of an unladen weight exceeding 15000 kg


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88024000 Aeroplanes & other aircraft, of an unladen weight exceeding 15000 kg

880260 Spacecraft (including salts & suborbital) spacecraft launch vehicles

88026000 Spacecraft (including salts & suborbital) spacecraft launch vehicles

8803 parts of goods of hdg no. 8801 or 8802

880310 Propellers & rotors & parts thereof

88031000 Propellers & rotors & parts thereof

880320 Under carriages & parts thereof

88032000 Under carriages & parts thereof

880330 Other parts of aero planes/helicopters

88033000 Other parts of aero planes/helicopters

880390 Other parts of goods of hdg 8801 or 8802

88039000 Other parts of goods of hdg 8801 or 8802

8804parachutes(including dirigible parachutes & paragliders) rotochutes; parts thereof & accessories thereto

880400 Parachutes(including dirigible parachutes & paraglide) rotochutes; parts thereof & accessories thereto

88040010 Parachutes & parts thereof & accessories thereto

88040020 Rotochutes & parts thereof & accessories thereto

8805aircraft launching gear; deck arrestor/similar gear; ground flying trainers; parts flying trainers and parts of these articles

880510 Aircraft launching gear & parts thereof deck-arrestor/similar gear & parts thereof

88051010 Aircraft launching gear

88051020 Deck arrestor or similar gear

88051030 Parts of aircraft lunching/deck arrestor gear

880521 Air combat simulators and parts thereof

88052100 Air combat simulators and parts thereof

880529 Other parts

88052900 Other parts

89 ships, BoaTs aNd fLoaTiNg sTrUcTUres

8901cruise ships, excursion boats, ferry-boats, cargo ships, barges and similar vessels for the transport of persons or goods

890110 Cruise ships, excursion boats & similar vessels principally designed for transport of persons, ferry-boats of all kinds

89011010 Ships

89011020 Launches

89011030 Boats


102 APPENDIx B

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89011040 Barges

89011090 Others

890120 Tankers

89012000 Tankers

890130 Refrigerated vessels, excl those of subheading no. 890120

89013000 Refrigerated vessels, excl those of subheading no. 890120

890190 Other vessels for transport of goods & other vessels for transport of persons & goods

89019000 Other vessels for transport of goods & other vessels for transport of persons & goods

8902fishing vessels; factory ships and other vessels for processing or preserving fishery products

890200 Fishing vessels; factory ships & other vessels for processing or preserving fishery products

89020010 Trawlers & other fishing vessels

89020090 Others

8903Yachts and other vessels for pleasure or sports; rowing boats and canoes

890310 Inflatable yachts & other vessels for pleasure sports; rowing boats & canoes

89031000 Inflatable yachts & other vessels for pleasure sports; rowing boats & canoes

890391 Sailboats, w/n with auxiliary motor

89039100 Sailboats, w/n with auxiliary motor

890392 Motorboats excl outboard motorboats

89039200 Motorboats excl outboard motorboats

890399 Other yachts & other vessels for pleasure/ sports; rowing boats and canoes

89039910 Canoes

89039990 Others

8904 Tugs and pusher craft



8905Light-vessels, fire-floats, dredgers, floating cranes, and other vessels the navigability of which is subsidiary to their main function; floating docks; floating or submersible drilling or production platforms

890510 Dredgers

89051000 Dredgers

890520 Floating or submersible drilling or production platforms


103APPENDIx B

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89052000 Floating or submersible drilling or production platforms

890590 Other vessels, fire floats etc

89059010 Floating docks

89059090 Other under heading 8905

8906 other vessels, including warships & lifeboats excluding rowing boats

890610 Warships of all kinds

89061000 Warships of all kinds

890690 Other warships

89069000 Other warships

8907other floating structures (e.g. fitters, tanks, coffer-dams, landing stages, buoys & beacons)

890710 Inflatable rafts

89071000 Inflatable rafts

890790 Other floating structures

89079000 Other floating structures

8908 Vessels & other floating structures for breaking up



Source: Compiled from the DGFT, Govt. of India, http://dgftcom.nic.in/


104 APPENDIx B

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Tab

le B

.2: T

op

10

Tra

nsp

ort

atio

n p

rod

uct

s e

xpo

rted

by

ind

ia t

o t

he

eU

(val

ue in

€ m

illio

n)

ran

k (2

007)

co

mm

od

ity

(hs

co

de)

1997

-98

2000

-01

2001

-02

2002

-03

2003

-04

2004

-05

2005

-06

2006

-07

2007

-08

2008

(A

pr -

Dec

)

% s

har

e in

tr

ansp

ort

ex

po

rts

to

eU

(20

07)

1V

ehic

les

with

spa

rk-ig

nitio

n in

tern

al c

ombu

stio

n re

cipr

ocat

ing

pist

on

engi

ne o

f cy

linde

r ca

paci

ty>

1000

cc

but

not>

1500

cc

(870

322)

0.9

0.4

0.5

0.1

76.7

92.2

162

241.

833

4.8

598.

938

.2

2O

ther

par

ts &

acc

esso

ries

of v

ehic

les

of h

eadi

ng 8

701-

8705

(870

899)

56.9

58.8

63.6

61.9

84.7

120.

515

2.2

185.

121

6.5

170.

624

.7

3O

ther

par

ts o

f ae

ropl

anes

/hel

icop

ters

(880

330)

14.4

26.9

4432

.137

.619

.222

.530

.514

0.6

246.

316

.1

4V

ehic

les

with

spa

rk-ig

nitio

n in

tern

al c

ombu

stio

n re

cipr

ocat

ing

engi

ne

of a

cyl

inde

r ca

paci

ty>

1500

cc

but<

= 3

000

cc (8

7032

3)34

.93.

114

.03.

368

.529

.336

.525

.742

.012

.54.

8

5O

ther

par

ts o

f go

ods

of h

eadi

ng 8

801

or 8

802

(880

390)

0.6

0.5

3.1

0.6

2.6

4.8

2.8

1.3

34.0

46.9

3.9

6D

rive

axle

s w

ith d

iffer

entia

l w/n

pro

vide

d w

ith o

ther

tra

nsm

issi

on

com

pone

nts

(870

850)

0.1

2.7

0.3

0.6

0.4

0.4

2.0

18.4

28.4

18.8

3.2

7O

ther

bra

kes

& s

ervo

-bra

kes

& p

arts

the

reof

870

839

1.4

9.3

7.5

4.1

6.2

6.4

10.8

18.8

26.5

0.0

3.0

8B

umpe

rs &

par

ts t

here

of (8

7081

0)5.

24.

94.

28.

57.

117

.223

.834

.425

.921

.33.

0

9G

oods

veh

icle

s, w

ith c

ombu

stio

n-ig

nitio

n in

tern

al c

ombu

stio

n st

atio

n en

gine

(die

sel/s

emi-d

iese

l), g

.v.w

.< =

5 t

on (8

7042

1)32

.422

.714

.74.

26.

610

.99.

711

.914

.213

.81.

6

10O

ther

par

ts &

acc

esso

ries

of m

otor

cyc

les

(incl

udin

g m

oped

(871

419)

1.9

3.0

2.6

2.5

4.6

5.6

10.8

9.8

13.2

9.9

1.5

exp

ort

Val

ue

(To

p 1

0 p

rod

uct

s)14

913

715

411

829

530

643

357

887

611

39

per

cen

tag

e sh

are

(To

p 1

0 p

rod

uct

s)38

.150

.562

.040

.353

.848

.454

.675

.585

.6

Sou

rce:

Aut

hors

’ cal

cula

tions

fro

m E

xpor

t-Im

port

Dat

aban

k, D

GFT

, Gov

t. o

f In

dia.

Not

e: E

xcha

nge

rate

s ar

e as

fol

low

s:

For

2000

, Re.

1 =

Є0.

0241

; for

200

1, R

e.1

= Є

0.02

37; f

or 2

002,

Re.

1 =

Є0.

0208

; for

200

3, R

e. 1

= Є

0.01

85; f

or 2

004,

Re.

1 =

Є0.

0177

; for

200

5, R

e. 1

= Є

0.01

85; f

or 2

006,

Re.

1 =

Є0.

0172

1;

for

2007

, Re.

1 =

Є0.

0175

; for

200

8 (A

pr–D

ec),

Re.

1 =

Є0.

0153

. (S

ourc

e: R

BI a

nd F

orei

gn E

xcha

nge

Dea

lers

’ Ass

ocia

tion

of In

dia,

htt

p://w

ww

.fed

ai.o

rg.in

/)


105APPENDIx B

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Tab

le B

.3: T

op

10

Tra

nsp

ort

atio

n p

rod

uct

s im

po

rted

by

ind

ia f

rom

th

e e

U

(val

ue in

€ m

illio

n)

ran

k (2

007)

co

mm

od

ity

(hs

co

de)

1997

-98

2000

-01

2001

-02

2002

-03

2003

-04

2004

-05

2005

-06

2006

-07

2007

-08

2008

(A

pr-

Dec

)

% s

hare

in

tota

l tra

nsp

im

port

from

eU

(200

7)

1A

erop

lane

s &

oth

er a

ircra

ft, o

f an

unl

aden

wei

ght

>20

00 k

g bu

t no

t ex

clud

ing

1500

0 kg

(880

230)

0.0

0.0

0.0

242.

80.

031

.720

95.2

265.

723

81.6

0.0

55.5

2A

erop

lane

s &

oth

er a

ircra

ft, o

f an

unl

ade

wei

ght

not

exce

edin

g 20

00 k

g (8

8022

0)0.

60.

00.

030

.80.

00.

00.

459

.128

4.6

0.1

6.6

3O

ther

par

ts &

acc

esso

ries

of v

ehic

les

of h

eadi

ng 8

701-

8705

(870

899)

112

55.6

79.0

44.1

88.2

135.

417

9.6

227.

423

0.0

264.

75.

4

4O

ther

par

ts o

f ae

ropl

anes

/hel

icop

ters

(880

330)

53.9

39.1

75.2

129.

913

5.1

121.

717

5.4

256.

321

0.9

117.

74.

9

5C

ruis

e sh

ips,

exc

ursi

on b

oats

& s

imila

r ve

ssel

s pr

inci

pally

de

sign

ed f

or t

rans

port

of

pers

ons,

fer

ry-b

oats

of

all k

inds

(890

110)

7.9

1.1

3.0

0.4

11.1

8.2

15.2

124.

320

4.1

71.7

4.8

6A

erop

lane

s &

oth

er a

ircra

ft, o

f an

unl

aden

wei

ght

exce

edin

g 15

000

kg (8

8024

0)10

2.9

0.0

86.7

0.0

27.9

429.

60.

013

97.7

150.

70.

03.

5

7O

ther

ves

sels

for

tra

nspo

rt o

f go

ods

& o

ther

ves

sels

for

tra

nspo

rt

of p

erso

ns &

goo

ds (8

9019

0)73

.733

.96.

931

.735

.12.

010

0.1

36.9

136.

020

7.8

3.2

8D

redg

ers

(890

510)

0.0

105.

679

.21.

112

.231

.684

.517

.912

9.4

51.1

3.0

9O

ther

ves

sels

, fire

floa

ts e

tc (8

9059

0)0.

19.

810

.41.

92.

318

.412

9.2

56.0

98.5

166.

92.

3

10V

ehic

le w

ith s

park

-igni

tion

inte

rnal

com

bust

ion

reci

proc

atin

g st

atio

n en

gine

of

cylin

der

capa

city

>30

00 c

c (8

7032

4)0.

80.

20.

80.

60.

76.

416

.622

.944

.949

.81.

0

imp

ort

Val

ue

(To

p 1

0 p

rod

uct

s)35

224

534

148

331

378

527

9624

6438

7993

0

per

cen

t sh

are

(To

p 1

0 p

rod

uct

s)62

.574

.182

.071

.352

.378

.089

.281

.190

.3

Sou

rce:

Aut

hors

’ cal

cula

tions

fro

m E

xpor

t-Im

port

Dat

aban

k, D

GFT

, Gov

t. o

f In

dia.

Not

e: E

xcha

nge

rate

s ar

e as

fol

low

s:

For

2000

, Re.

1 =

Є0.

0241

; for

200

1, R

e.1

= Є

0.02

37; f

or 2

002,

Re.

1 =

Є0.

0208

; for

200

3, R

e. 1

= Є

0.01

85; f

or 2

004,

Re.

1 =

Є0.

0177

; for

200

5, R

e. 1

= Є

0.01

85; f

or 2

006,

Re.

1 =

Є0.

0172

1;

for

2007

, Re.

1 =

Є0.

0175

; for

200

8 (A

pr–D

ec),

Re.

1 =

Є0.

0153

. (S

ourc

e: R

BI a

nd F

orei

gn E

xcha

nge

Dea

lers

’ Ass

ocia

tion

of In

dia,

htt

p://w

ww

.fed

ai.o

rg.in

/)


106 APPENDIx B

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Tab

le B

.4: c

ust

om

s T

arif

f fo

r T

ran

spo

rtat

ion

eq

uip

men

t fo

r 20

09-1

0

s. N

oB

asic

cu

sto

m d

uty

ap

plic

able

eq

uip

men

ts

110

per

cen

t

Rai

lway

and

rel

ated

equ

ipm

ent

(HS

Cod

e 86

);

trac

tors

(exc

l tra

ctor

s of

hea

ding

no.

870

9) (8

701)

,

mot

or v

ehic

les

for

the

tran

spor

t of

ten

or

mor

e pe

rson

s, in

clud

ing

the

driv

er (8

702)

, Mot

or v

ehic

les

for

the

tran

spor

t of

goo

ds (8

704)

,

spec

ial p

urpo

se, R

ailw

ay o

r tr

amw

ay p

asse

nger

coa

ches

, lug

gage

van

s, p

ost-

offic

e co

ache

s &

oth

er s

peci

al r

ailw

ays

or t

ram

way

s no

t se

lf-pr

opel

led

(exc

ludi

ng it

ems

of 8

604)

(870

5),

Cha

ssis

fitt

ed w

ith e

ngin

es, f

or t

he m

otor

veh

icle

s (8

606)

,

Bod

ies

(incl

udin

g ca

bs),

for t

he m

otor

veh

icle

s of

hea

ding

870

1 to

870

5 (8

707)

, par

ts a

nd a

cces

sorie

s of

the

mot

or v

ehic

les

of h

eadi

ngs

8701

to 8

705

(870

8),

Wor

ks tr

ucks

, use

d in

fact

orie

s, d

ock

area

/airp

ort,

etc

for s

hort

er d

ista

nce

tran

spor

t of g

oods

; tra

ctor

s us

ed o

n ra

ilway

pla

tfor

ms;

par

ts o

f the

abo

ve (8

709)

,

Inva

lid c

arria

ges,

w/n

mot

oris

ed/o

ther

wis

e m

echa

nica

lly p

rope

lled

(871

3),

Par

ts &

acc

esso

ries

of v

ehic

les

of h

dg 8

711-

8713

(871

4),

Trai

lers

& s

emi-t

raile

rs; o

ther

veh

icle

s, n

ot m

echa

nica

lly p

rope

lled;

par

ts t

here

of (8

716)

, and

bal

loon

s an

d di

rigib

les,

glid

ers,

han

d gi

rder

s (H

S c

ode

8801

), H

elic

opte

rs o

f an

unl

aden

wei

ght<

= 2

000

kg (8

8021

1),

Hel

icop

ters

of

an u

nlad

en w

eigh

t >

200

0 kg

(880

212)

, Oth

er p

arts

of

good

s of

hdg

880

1 or

880

2 (8

8039

0),

para

chut

es (i

nclu

ding

diri

gibl

e pa

rach

utes

& p

arag

lider

s) r

otoc

hute

s; p

arts

the

reof

& a

cces

sorie

s th

eret

o (8

804)

,

and

airc

raft

laun

chin

g ge

ar; d

eck

arre

stor

/sim

ilar

gear

; gro

und

flyin

g tr

aine

rs; p

arts

flyi

ng t

rain

ers

and

part

s of

the

se a

rtic

les,

and

shi

ps, b

oats

and

floa

ting

stru

ctur

es (H

S c

ode

89).

23

per

cent

App

licab

le o

n A

erop

lane

s &

oth

er a

ircra

ft, o

f an

unl

ade

wei

ght

not

exce

edin

g 20

00 k

g (8

8022

0),

Aer

opla

nes

& o

ther

airc

raft

, of

an u

nlad

en w

eigh

t >

2000

kg

but

not

exce

edin

g 15

000

kg (8

8023

0),

aero

plan

es &

oth

er a

ircra

ft, o

f an

unl

aden

wei

ght

exce

edin

g 15

000

kg (8

8024

0), p

rope

llers

& r

otor

s &

par

ts t

here

of (8

8031

0),

Und

er-c

arria

ges

& p

arts

the

reof

(880

320)

and

othe

r pa

rts

of a

ero

plan

es/h

elic

opte

rs (8

8033

0).

310

0 pe

r ce

ntA

pplic

able

on

mot

or c

ars

and

othe

r mot

or v

ehic

les

prin

cipa

lly d

esig

ned

for t

he tr

ansp

ort o

f per

sons

(oth

er th

an th

ose

of h

eadi

ng 8

702)

, inc

ludi

ng ra

cing

car

s,

etc.

, Mot

orcy

cles

(inc

ludi

ng m

oped

s) &

cyc

les

fitte

d w

ith a

uxili

ary

mot

or, w

/n w

ith s

ide-

cars

; sid

e-ca

rs (8

711)

.


107APPENDIx B

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appendix c

overview of gaTs

The General Agreement on Trade in Services (GATS), established in the Uruguay

Round, is the first-ever set of multilateral, legally enforceable rules governing trade in

services. The main aim of GATS is to progressively liberalise trade and investment in

services through periodic rounds of negotiations.

Under GATS, services are traded in four different modes:

Mode 1: “Cross-Border Supply of Services” refers to the delivery of services across

countries such as the cross-country movement of passengers and freight, electronic

delivery of information and data among others.

Mode 2: “Consumption Abroad” refers to the physical movement of the consumer of

the service to the location where the service is provided and consumed.

Mode 3: “Commercial Presence” refers to the establishment of foreign affiliates and

subsidiaries of foreign service companies, joint ventures, partnerships, representative

offices and branches. It is analogous to FDI in services.

Mode 4: “Presence of Natural Persons” refers to natural persons who are themselves

service suppliers, as well as natural persons who are employees of service suppliers

temporarily present in the other member’s market to provide services.

In Modes 1 and 2 the service supplier is not present within the territory of the member,

while in Modes 3 and 4 the service supplier is present within the territory of the member.

GATS contains two kinds of provisions. The first are general obligations, some of

which apply to all service sectors [for example, Most Favoured Nation (MFN) and

Transparency] and some only to scheduled specific commitments (for example,

Article XI: Payments and Transfers). The second are specific commitments, which are

negotiated undertakings particular to each GATS signatory.

Under the MFN Treatment (Article II), a Member is obliged to provide to another

Member treatment which is no less favourable than that which it provides to any

other country, whether a Member or not (that is, if a WTO Member Country offers a


108 APPENDIx C

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certain privilege to any other country, whether it be a Member or not, it has to extend

the same treatment to all WTO member countries). However, GATS allowed member

countries to undertake exemptions to this clause, in their initial commitments in the

Uruguay Round, subject to review.

The clause on Transparency (Article III) requires each Member country to publish

all measures of general applications which pertain to or affect the operation of the

Agreement. Countries are also required to publish international agreements pertaining

to or affecting trade in services. In other words, the Council of Trade in Services will

have to be informed – at least annually – of the introduction of any new laws or any

changes to existing laws, regulations and administrative guidelines. WTO member

countries can make requests regarding specific information which the concerned

country will have to provide promptly.

GATS aims to progressively liberalise service trade under the four modes of service

supply. For each mode a country can impose two types of restrictions (limitations):

Market Access and/or National Treatment. A country is said to have imposed a Market

Access restriction if it does not allow (or partially allows with some restrictions) foreign

service providers to enter and operate in domestic market. A National Treatment

restriction exists when foreign services or service providers are allowed to enter

the market but are treated less favourably than domestic service providers. During

the successive rounds of negotiations, member countries negotiate and undertake

commitments to liberalise market access and/or national treatment in specific

sectors in what is known as the Sectoral Schedule of Commitments and across all

or several sectors in the Horizontal Schedule of Commitments. Both the sectoral and

horizontal schedules have to be read together to understand the extent and nature

of commitments undertaken in a particular sector. Thus, market access and national

treatment are negotiated obligations. It is possible for countries not to grant full

market access and deny national treatment by putting limitations and conditions on

market access and conditions and qualifications on national treatment in particular

sectors/sub-sectors. This is done by recording such limitations and qualifications in

the commitment schedules under the market access and national treatment columns.

In its schedule a country is said to have made a “Full” commitment in a particular

mode/sector if there are no restrictions on market access or national treatment. A

country is said to have made “Partial” commitment if the commitment is subject

to some restrictions on market access or national treatment. If a country does not

make any commitment to liberalise a particular sector or mode of supply and retains

the right to impose restrictions in the future, it is said to have kept the sector/mode


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“Unbound”. It is expected that successive rounds of negotiations will secure further

liberalisation by adding more sectors to a country’s schedule and removing limitations

and qualifications, if any, in sectors/sub-sectors already in the schedule. This is

done mode-wise for each sector/sub-sector. It is also possible for countries to make

commitments which are outside the scope of market access and national treatment

as defined in GATS. These are called Additional Commitments (Article XVIII). This

provides scope for making commitments in such regulatory areas as licensing,

qualifications and standards applicable to services.

GATS covers all services except those supplied in the exercise of government authority.

It follows a positive list approach which indicates that there is no a priori exclusion

of any service sector and that countries are free to choose the service sectors/sub-

sectors and modes within those sectors/sub-sectors for scheduling commitments.


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© 2010 ebtc

This publication has been produced with the assistance of the European Union. The contents of this publication are the sole responsibility of the European Business and Technology Centre and can in no way be taken to reflect the views of the European Union.

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