India has infrastructure projects underway everywhere, said Arya, but some are a little slow.

India has a coastline of 7,600 kilometers, but its maritime trade accounts for just 1 percent of the world market. Air cargo traffic is growing more than 10 percent a year. The countrys 3.3 million km of roads move 60 percent of the nations freight, and U.S. $10 billion is invested in road projects this fiscal year alone. The rail system boasts nearly 64,500 km of track on which 19,000 trains operate daily.

Hundreds of billions of U.S. dollars are slated for infrastructure investment in India through 2017, said Arya. The countrys export-import trade is expected to double to U.S. $1 trillion by 2016 as India allows rising foreign direct investment in Indian companies.

Three government initiatives will improve infrastructure, he continued. First is a new maritime agenda to boost port capacity by 2020. Second is multiple tax incentives to attract investment to the sector. And third is the long-awaited general sales tax, or GST, a proposed simplified tax that Arya hopes may be in place in one or two more years.

India has 13 major ports and many smaller ones, plus 250 inland container depots and container freight stations. Planned highways will connect the four key cities of Delhi, Kolkata, Chennai and Mumbai, and six-lane north-south and east-west highways are also on the drawing board. Plans include dedicated freight corridors and dedicated freight rail lines for cargo, to open by 2018.

However, despite the huge investments in infrastructure, said Arya, Indias logistics industry is highly unorganized and fragmented. The top 10 players only have 2 percent market share.

In 1987, he said, it took six to seven days for a truck to go 1,400 km from Mumbai to Delhi, at a cost of 650 rupees per ton. Today, a truck makes the same trip in two to three days, but at a cost of 2,700 rupees/t. The cost of diesel today is four times as high as in 1987, the cost of a truck is up five-fold, and the drivers salary has risen 15-fold.

Logistics, as a percent of GDP, is 14 percent in India, compared to 14.5 percent in China, 12.5 percent in Singapore, 12.2 percent in the United Kingdom, 10.5 percent in Japan, and just 8.7 percent in the United States, Arya said. Why are logistics costs so high in India?

Arya listed the reasons. Inventory costs are high, due to the many stock points – underscoring the urgent need for the GST. Network optimization is sorely needed. Cargo is generally shipped in small lots. There is little unitization or palletizing. There is a lack of infrastructure at the stock points. There is a lack of mechanization, and everything is done manually.

Scarcity of labor is a problem for logistics businesses, Arya continued. Mechanization is the only solution to bring costs down. The industry needs better information technology and integration with service providers. Product packaging needs improvement to reduce damages and pilfering.

We need to spend more to save more in the long run, said Arya. But the problem is, customers first demand is, I want it cheap. We need a mind-set change.

A total cost perspective is needed, said Arya. Forging partnerships between customers and logics companies is the answer.

Aryas company began as a family trucking company, but is now a logistics company, through its joint venture with Germanys Rhenus Group, itself part of Rethmann Group. In India Rhenus Prolog Logistics has 750 employees, 25 offices and 700,000 square feet of warehouse space. It offers modern side-loading trucks (which took six months to get government approval, noted Arya) and custom-built tankers, and has introduced shared modern warehouse facilities.

Despite the high level of cross-border and in-country services that companies like Rhenus can offer, Arya concluded, because there is no entry barrier to the industry, Indias logistics will be fragmented for a very long time.