Transportation Economics Project.

8/4/2019 Transportation Economics Project.

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BY: Aman Milwani

All data content provided By Aman Milwani



Transport or transportationis the movement of peopleand goods from onelocation to another.

Transport is performed by various modes, such as air,rail, road and water.



Transportation

Infrastructure

Roads, railways,airways,

waterways, canalspipelines

and

Airports, railway stations, bus

stations seaports.

Vehicles

Automobiles, bicycles,

buses,trains,people

and

aircraft.

Operations

Operations deal withthe way the vehicles

are operated, and theprocedures set for thispurpose including the

financing, legalitiesand policies.

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Transport services areindispensible for the smoothfunctioning of an economy.

These include the following-

RAIL TRANSPORT ROAD TRANSPORT WATER TRANSPORT

RAIL TRANSPORT

ROAD TRANSPORT





Large Market for goods : The transportsystem helps to expand the market for goods.

Producers are able to sell their goods all overthe country. And by doing so it makes largescale production through division of labour.Defence : Good transport system is not only

necessary for internal security but also for itsdefence against any external threat. A good

transport system can transfer war goods andsoldiers from one place to another faster.Development of Civilization :Means of transport

are very helpful in bringing out social changesin a country. When the people of developedregions or countries come into contact of the

people of less developed countries, they cometo know many things.

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http://images.google.co.in/imgres?imgurl=http://www.granddadshobbyshop.com/DML03533.jpg&imgrefurl=http://www.aliraqi.org/forums/showthread.php?t=46453&usg=__86JBRQoSbxcKPhoJdzypEX9fFDo=&h=486&w=800&sz=105&hl=en&start=15&tbnid=MiqO0LVJ6srieM:&tbnh=87&tbnw=143&prev=/images?q=army+tank&gbv=2&hl=en

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India’s transport sector is large and diverse; itcaters to the needs of 1.1 billion people. In 1997, thesector contributed 4.4 percent to the nation’s GDP, with road transportation contributing the lion’sshare.

Good physical connectivity in the urban and ruralareas is essential for economic growth. Since theearly 1990s, India's growing economy has witnesseda rise in demand for transport infrastructure and

services by around 10 percent a year.

However, the sector has not been able to keep pace with rising demand and is proving to be a drag onthe economy. Major improvements in the sector aretherefore required to support the country's

continued economic growth and to reduce poverty.



Roads are the dominant mode of transportation in India today. They carry almost 90 percent of thecountry’s passenger traffic and 65percent of its freight. The density of India’s highway network -- at 0.66km of highway per square kilometerof land – is similar to that of the United States (0.65) and much

greater than China's (0.16) or Brazil's(0.20). However, most highways inIndia are narrow and congested withpoor surface quality, and 40 percentof India’s villages do not have access

to all-weather roads.



India has 12 major and 185 minor andintermediate ports along its vastcoastline. These ports serve thecountry’s growing foreign trade inpetroleum products, iron ore, and coal,

as well as the increasing movement of containers. Inland water transportationremains largely undeveloped despiteIndia's 14,000 kilometers of navigablerivers and canals.

India has 60 airports,including 11international airports.The dramatic increase inair traffic for bothpassengers and cargo inrecent years has placed aheavy strain on the

country's four majorairports.Transport infrastructurein India is betterdeveloped in thesouthern and

southwestern parts of thecountry.



The major challenges facing thesector are:

India’s roads are congestedand of poor quality. Lanecapacity is low - most nationalhighways are two lanes or less. A quarter of all India's highways arecongested, reducing truck and busspeeds to 30-40 kmph. Most roads

are of poor quality. Roadmaintenance remains significantly under-funded - only around one-third of maintenance needs aremet. This leads to the deteriorationof roads and high transport costs

for users

Rural areas have pooraccess. Roads are significantfor the development of therural areas - home to almost 70percent of India's population. Although the rural roadnetwork is extensive, some 40percent of India’s villages donot have access to all-weatherroads and remain cut off

during the monsoon season.The problem is more acutein India's northern andnortheastern states which arepoorly linked to the country’smajor economic centers.



The railways are facing severe capacityconstraints. All the country’s high-density railcorridors face severe capacity constraints. Also,freight transportation costs by rail are muchhigher than in most countries as freight tariffs

in India have been kept high to subsidizepassenger traffic.

Urban centres are severely congested. InMumbai and other metropolitan centers, roads

are often severly congested during the rushhours. The dramatic growth in vehicleownership – at some 15 percent a year duringthe past decade - has reduced rush hour speedsto 5-10 km an hour in the central areas of majorcities.



Ports are congested and inefficient.Port traffic has more than doubled duringthe 1990s, touching 521 million tons in 2004-05. This is expected to grow further to about900 million tons by 2011-12. India's ports

need to significantly ramp up their capacity and efficiency to meet this surging demand.

Airport infrastructure is strained. Airtraffic has been growing at over 15 percent a year leading to severe strain on

infrastructure at major airports, especially inthe Delhi and Mumbai airports whichaccount for around 50 percent of nation’s airtraffic.

ports

Helicopter



According to India’s Tenth Five Year Plan, the Government aims tomodernize, expand, and integrate the country's transport services. It alsoseeks to mobilize resources for this purpose and to gradually shift the roleof government from that of a producer to an enabler. In recent years, the

Government has made substantial efforts to tackle the sector’sshortcomings and to reform its transport institutions. These include:

Key Government

Strategies

Increasing public funding for transportation inits Five Year Plans.

Launching the ambitious National Highway

Development Program with improved connectivity between Delhi, Mumbai, Chennai and Kolkata,popularly called the Golden Quadrilateral, in the firstphase, and now followed by a seven phase programending in 2015

Financing the development and maintenance of

roads by creating a Central Road Fund (CRF)through an earmarked tax on diesel and petrol.



Operationalising the National Highway Authority to act as an infrastructureprocurer and not just provider.

Amending the National Highway Act toexpedite land acquisition, permit privatefinancing and allow tolling.

Improving rural access by launching thePradhan Mantri Gram Sadak Yojana

(Prime Minister’s Rural Roads Program).



Reducing the congestion on rail

corridors along the highly traffickedGolden Quadrilateral andimproving port connectivity by launching the National Rail Vikas Yojana (National Railway

Development Program) and morerecently the development of dedicated freight corridor.

Upgrading infrastructure andconnectivity in the country's twelvemajor ports by initiating theNational Maritime DevelopmentProgram.



Privatization and

expansion of theMumbai and NewDelhi Airports.

Enhancing sectorcapacity and improvingefficiencies through clearpolicy directive for

greater private sectorparticipation. Large partsof the NHDP and NMDPare to be executedthrough public private

partnerships (PPP).



In India the water transport is of two types:-



In water-based transport generally, fuel costs are lowand environmental pollution is lower than intransport by road, rail, or air. The waterway isnaturally available, which has to be ‘trained’,maintained, and upgraded. Water-based transport isespecially effective when the source and destinationare waterfront locations. Transport based on inland

waterways (or inland water transport, IWT)—rivers,canals, lakes, etc. and also overlapping coastalshipping in tidal rivers—constitutes 20% of thetransport sector in Germany (WB 2005) and 32% inBangladesh (Rahman 1994). In India it has a paltry

share of 0.15% (Raghuram 2004).



Passenger Movement

IWT-based passenger movement is mainly by ferry across rivers, onshort stretches along rivers, and tourism-based passenger traffic (inGoa, Kerala, Sunderbans, and northern regions). Among factorsthat affect passenger movement are the following:

Travel Time. With construction of bridges, travel time by land isgenerally reducing. Faster ferries and launches can make IWT competitive.

Cost. The total cost of ferry plus subsequent mode of transportneeds to be taken into account in planning.

Interchange Convenience. Waterway transport should be able to move

seamlessly to other modes, e.g. bus and train. A study in the Kochi metroarea, which suggests that IWT cannot be ignored in the future growthof the city, calls for integrated investments to increase complementarities with other modes, faster vessels, unified pricing, ticketing, and targetedsubsidies. Mumbai has experimented with hovercraft (apart fromcontinuing ferry), but a sustainable service mix has not been found.

Inland waterways provide a convenient function in related activities,such as carriage of vehicles, tourism, and water sports



Carriage of Vehicles (preferably in roll-on-roll-off mode). West Bengal, Kerala, and Goa havesignificant number of these ferry services, but a

great potential exists, with faster boats, properlanding facilities, andinterchange with other modes.

Tourism, Including Stay and Entertainment. In

Kerala, Alapuzha, and to a smaller extentKozhikode, are centers of this activity, especially forhouseboats. Boats that provide music anddining are flourishing inMumbai, Goa, and Kochi. River cruises, scheduledand chartered, are also available

Water Sports. This new sector has possibilities innorth and east Indian rivers. White water raftingand trekking on iced mountain stretchesof rivers are examples (CMYK 2005).



Cargo Movement

Movement of commodities like tea, jute, and spices in the easternsector, connected to the river port in Kolkata, was among the early commercial drivers of preindependence India. Logistical convenience of river transport, which used to be a determining factor in the location of industrial activity, may be less so today, though access to water for

processing and in some cases effluent treatment is still a considerationin location.Growth in this sector has been sluggish, with the outstanding exceptionof the tidal river-canal system in Goa, where the Mandovi-Zuari-Cumbarjua system moved some 30 million tons of iron ore in 2003-4(GMOEA 2004).

IWT-based cargo movement becomes viable if technological andphysical viability and commercial potential exists and operating policiesof carriers and associated agencies are conducive. Some factors thataffect operational economics are the availability of right-of-way (waterway); carriers (navigational vessels); terminal facilities (jetties and

ports), and managerial and supporting infrastructure systems.



Technological and Physical Viability

Water Flow. In the main waterways, water flow may have decreasedover the years because of increased drawing on water arising fromhabitation and industrial and agricultural needs. Damming may alsohave brought down the extent of regular flow

River Training, Dredging, and Navigation. To consistently provide asufficient depth for plying draft may require maintenance of banks andperiodic riverbed dredging. Cost estimates of river training on theSabarmati are about Rs 10–11 crore/km (SRFDCL 1998). In ruralareas the figure could be lower at say Rs 8–9 crore/km. Navigationrequirements are channel markings, night navigationalaids—including the possible deployment of global positioning system(GPS)—and river maps and charts. The National Inland NavigationInstitute (NINI) at Patna has been assigned the task of developing theuse of appropriate technology.

Locks. Where the physical drop of the river channel is excessive

locks have to be provided to manage the height differential.



Access of Cargo.The cargo has to be accessible to the waterway at

both ends, to ensure door-to-door movement.

Availability of Vessels and Associated Infrastructure.Private operators have a substantial fleet buthave of late been scrapping vessels.

Governmental help may be required to encouragethem to invest in fleet maintenance and growth.The role of government-owned shipyards isimportant in this domain, including theRajabagan Dock Yard in Kolkata owned andoperated by the Central Inland Water Transport

Corporation (CIWTC). CIWTC can provide repairfacilities for other operators in the area as well.There is also a well-established industry of manufacture, maintenance, and repair of bargesin Goa, some of which are operated by miningcompanies.



Operational Viability

Cost. IWT is a capital-intensive industry. Significant investment isrequired in vessels.

Providing and maintaining the waterway and terminalsrequires even higher investment.Operating costs can involve vehiclecosts, fuel costs, crew costs, maintenance costs, andloading/unloading costs. Contingency costs include running aground and damage to vessels.

Systems Perspective. Rangaraj and Raghuram (2005b), emphasizing the systemsperspective, draws on illustrative examples from Goa and NW-1. It proposes a model foridentifying the range of viable operations from the point of view of (i) the competitive fareprovided by othermodes, (ii) the size of barge and therefore the operating cost, (iii) thedesired throughput, and (iv) the total cost to the customer.

Fleet Planning. Barge operations rely on economies of scale. Largerbarges require larger water depth, have lower operating costs but higherinventory staging costs. They may alsohave operating restrictions. Small barges, on the other hand, may congest traffic. A range of sizes offer a better choice.

Scheduling. Scheduled runs have the systemic advantage of more certainty for customers,

routine vehicle deployment, and control of operational costs. Chartering provides for moreresponsiveness and can reduce no remunerative runs.



Environmental Impact

The increased drawing of water fordrinking, irrigation, construction,and other activity reduces the overallflow of water in downstream regions andmakes transport operations difficult.Dams also hamper smooth transport. Butwhere IWT is physically possible andcommercially viable as part of a supply

chain for a shipper, it is usually the mostappealing environmentally, with its lowfuel consumption and ability to carry inbulk, thereby reducing handling-relatedpollution and congestion.



Shipping is an importantmode of transport in indiabecause India has a longcoastline of 7516 kms and

large overseas trade. Due towell developed watersystem in india, a lot offreight taxes are saved.

Oceans are free gift of

nature therefore no cost isinvolved in theirconstruction.

Demerits of Shipping

o It has high operating

cost.

o Indian ships have toface hard competition with foreign shippingcompanies.

oLow productivity of dock labour andequipments

oInadequate tonnagecapacity.



Given a sector turnover of about Rs 110 crore annually, the sectorinvestment of Rs308 crore (Rs 1701 crore proposed) in the Ninth Plan, and in the Tenth Plan of Rs5665 crore (proposed) does not make commercial or economic sense. Existence of adriving cargo stream of sufficient volume is required to justify large investments.Natural draft of at least 2 m should be available for operations of craft of viablesize. Passenger movements are possible at low cost, but would need faster vesselsand good interchange facilities. Launches carrying road vehicles may be a viable andcost-effective proposition in some parts of the country. Tourism and relatedactivities offer good potential with appropriate local investments and operational

control, wherever relevant. Technical capability and vessel supply are available inthe country and a unified and liberalized policy with regard to IWT and coastalshipping will benefit the sector. Government should invest in a measured manner,given the considerations of a possible primary driving cargo and specific geographicpotential. A tie-up with the industrial location policy to drive demand would beessential.



NW-1: Investment based on integrated water use forirrigation, drinking and industry, and for controlled flow.

NW-2: Investment due to strategic importance as an alternate

route for bulk movements

NW-3: Tourism-related investment

New canal systems (e.g. Narmada canal)

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