Road transportation sub-segment
India has the world’s second-largest network of roads 3.83
million km after US’s 6.43 million km national highways form only 2% of the
total by length and carry about 40% of the traffic. About 80% of the roads in
India are village roads. The road sector is significant to India’s
Transportation segment as it account for nearly 65% of the freight and 85% of
the passenger traffic in the country. This sub-segment is highly fragmented
with the truck operators owning less than five trucks estimated to account for
over 75% of the truck fleet.
It is estimated that
10% of the market belongs to those with 6-10 trucks; 4% to those with 11-15
trucks; 3% belongs to those with 16-20 trucks; and only 4% of fleet belongs to
those with more than 20 trucks. This industry is also characterized by intense
competition which is the result of relatively lower capital requirement ease of
obtaining driving licenses and permits.
The small operators are involved mainly in the physical
movement of goods and depend on brokers and other fleet operators who in turn
depend on the booking agents for obtaining business. The small operators are
not in a position to perform functions of aggregating handling delivering of
cargo and marketing. Besides they do not have geographical reach and necessary
infrastructure to tap business on a continuous basis and thus rely on brokers.
The large fleet operators are small in number and generally
operate throughout the country. These fleet operators primarily work on a hub and
spoke model. The hub and spoke distribution system enables optimization of
costs and higher revenues for the transport companies and fleet operators.
These transport companies generally have formal contracts with the users which
is very rare in the case of small operators.
Large operators can
also bid for the contracts with customers. They utilize the services of the
smaller operators when additional vehicles are required. Over the period FY
2001-07 for which detailed data is available from the Government of India Go I
the average annual growth in the road sector was around 14.3% at current prices
and 9.6% at constant prices. Which was much higher than the overall GDP growth
during the period.
Railway
Transportation Sub- Segment
India has the second largest rail network 63,000 km in the
world. The Indian Railways have grown in to a vast network of over 7,500
railway stations a fleet of about 8,600 locomotives, 41,000 coaches & over
2,40,000 wagons.
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