The ancient silk route that helped boost the trade between India and China centuries ago is set to reopen with Indian logistics major Gati Ltd signing an agreement with China Railway Express International Logistics Company Ltd to carry goods on either side of the border in March. The Chinese firm is the global logistics arm of the state-owned China Railway.
The re-opening of the silk route will help slash time and cost for moving goods from South China to India and vice versa. India-China annual trade is in the region of about $20 billion and transportation costs typically account for 10-13 per cent of the total trade. "The transportation cost will drop by about 20-30 per cent and the biggest beneficiary will be the small and medium players," said Rajeev Chopra, country head, international, at Gati. The time of carrying goods is expected to also be halved, he said.
Typically, the cost of moving a 20-foot container by sea from Shanghai to Nhava Sheva in Mumbai is about $ 950. From the port, it takes another $ 800 for moving the box to Delhi by rail and road. At present, machinery, electronics and textiles are transported by sea from China to various Indian ports at the first stage and from there through a mix of rail and road to inland locations. The entire exercise takes about 40 days.
"This will be halved to 20 days or even less once we starts operations," Mahendra Agarwal, CEO of Gati told reporters after signing the agreement with China Railway to co-operate in freight forwarding, ocean freight, courier and logistics services earlier this week in Mumbai.
China Railway runs dedicated freight trains from five key locations in China to Lhasa on the Tibetan border. Chinese Trucks will cart cargo on the 650 km-stretch from Lhasa to Nathula Pass linking Sikkim.
From March, Indian trucks will go up to Nathula Pass, 30 kms into the Chinese territory, pick-up and move the goods into India. Agarwal said that roads on both sides were not in a good state to move containers on trucks carrying 7-8 tonnes. "But, China is expanding its railway and improving its road network and the situation will improve soon," he said.
"We are re-inventing the silk route that our ancestors invented about 2000 years ago. But, this time, goods will not be moved on camel backs but on trucks," said Qiao Song, vice president, China Railway Express International Logistics.
Song is looking at a market share of $ 200-230 million and Gati hopes to earn $10 million as freight revenue from the agreement with its Chinese partner during the first 12 months of operations. This will help raise its overseas revenues to 15 per cent from 9 per cent of its total turnover. Gati will invest $ 100 million by 2009 to build warehouses, racking systems, material handling equipment and information technology.