Shubhra Tandon

Transport Corporation of India (TCI) is celebrating 50 years of service to the logistics sector. Its Vice-Chairman and Managing Director, Mr D. P. Agarwal, spoke to Business Line on the company’s contribution to the sector since 1958, when the transport sector was gearing up to meet the requirements of growing trade.

Excerpts from the interview:

This is your 50th year in existence. What has the journey been like for the company?

Our journey over the last 50 years has been difficult, yet exciting. Today, after 50 years of existence, Transport Corporation of India, which had essentially started as a conventional trucking company, has now grown to become India’s leading Integrated Logistics Service Provider, offering a wide spectrum of services.

We have been able to reach where we are today, as we believe in being a ‘learning’ company where structures, systems and processes consistently evolve and are adapted to meet the changing requirements of the market. An excellent cadre of professional managers and strong entrepreneurial set-up has given the company a significant competitive edge.

Please tell us how the company was established and how it progressed further.

Established in 1958, TCI has been the driving force of the logistics industry since the last 50 years. The company started from “one-truck, one-man, one-office,” and now has a fleet of over 7,000 operating trucks with a workforce of 6,500 and a turnover of Rs 1,450 crore.

It was the vision of late P. D. Agarwal, TCI’s founder-Chairman to provide an efficient transport system that led to the setting up of the company. India’s newly found Independence was throwing up opportunities for the growth of various sectors.

The country was being united through trade and business. This required the transportation of goods from one corner of the country to another. Mr Agarwal took advantage of this opportunity. His strong business acumen made him realise the importance of penetrating the country’s most inaccessible areas and delivering essential goods on time.

Over the years, TCI has crossed a number of path-breaking milestones. It became a private limited company in 1965 and a public limited one in 1974. When the age of computers was just dawning, TCI computerised its offices way back in 1968. The journey thereon has been one of continuous growth, expansion of business, diversification and launch of new businesses and surpassing customer expectations.

The company has adopted a tagline ‘Moving Together, Growing Together’ which clearly reflects its dedication to the costumers, employees and stakeholders. We have grown over the years with a customer-centric approach, world class resources, state-of-art technology and professional management.

How was the transport industry 50 years back and what kind of changes have you seen it going through?

At the time of the company’s inception, the logistics sector was not well-developed. This acted as a hurdle in the path of the smooth functioning of other major sectors. Over the years, the scenario has changed. The road transport sector in India has expanded manifold in the 50 years after Independence, both in terms of spread and capacity.

As per the World Bank report, the share of road transport in GDP is now 3.69 per cent, which accounts for a major share of all transport modes, which contribute 5.5 per cent to GDP, and handles more than 60 per cent of the freight movement.

Apart from the transport sector, other segments or divisions of the logistics sector in the country, such as warehousing, express delivery, cargo movement by air, sea, etc., have advanced over the last 50 years. The logistics industry is set to witness significant growth in the coming years. This can be directly attributed to the growth experienced by major industries such as automobiles, pharmaceuticals, retail and FMCG.

More and more companies are going in for third party logistics (3PL) services. To meet their expectation levels, logistics companies on their part are also bringing in a lot of innovation and expertise, something that could not have been imagined 50 years ago.

For example, specialised services are being introduced for transportation of pharmaceutical/ medical products, as extra care needs to be taken for these items. Similarly, a lot of technological advancement has been brought in for the movement of cargo by sea or air.

What about government policy and the socio-economic environment? How have these led to evolution in the sector?

The Indian logistics sector encompasses such modes as road and rail for carrying out logistics activities. The robust growth of the economy, coupled with the rise in activities witnessed by various industry verticals such as telecom, pharmaceuticals, etc., has widened the scope of services offered by the road and rail freight sectors.

This is despite the various deterrents of continuous fluctuations in fuel prices, rise in input prices, government policy changes, and so on. If we look at the issue of fuel price hike from a larger perspective, it affects both road and rail transport.

In the railways, most freight trains on various routes are still hauled by diesel- powered locomotives and hence the increase in fuel price has its impact on the railways. Similarly, fuel price hikes increase the transportation costs in the trucking sector.

Also, logistics is still not identified as an individual industry. It comes under the purview of almost six different ministries, like MOCA, MOST, MOR and so on. While some areas are still fragmented and neglected, areas such as air cargo have evolved in the past few years. Infrastructure development is another area that requires focus.

What do you feel about the prospects of the sector now and what will be the drivers for its growth?

The Indian logistics sector has over the years become abuzz with activity and is witnessing a lot of growth. The economy is steadily moving forward on its path to prosperity with economic development being the focal point of the progress. In the post liberalisation era, India has attracted FDI on account of its excellent economic performance.

According to a study by Assocham, India’s logistics sector attracted investments worth Rs 23,200 crore in first half of 2008. It outclassed some of the major sectors including aviation (Rs 20,890 cr), metals and mining (Rs 8,500 cr) and consumer durables (Rs 6,000 cr), among others.

According to Cushman & Wakefield, the Indian logistics industry is expected to grow at 15-20 per cent per annum, reaching revenues of $385 billion by 2015. The accelerated growth of the logistics industry, coupled with an increasing trend to outsource warehousing activities, has made India a vast and untapped market.

For long, the scope of the logistics sector was limited to basic transportation of goods. However, over time, the range of services offered by the logistics companies has increased.

Several factors have favourably impacted the growth of the logistics industry — the country’s changing tax structure, growth across major industry segments such as automobile, pharmaceutical, fast-moving consumer goods (FMCG), and the emergence of organised retail.

The future for logistics outsourcing or 3-PL, multi-modal logistics services, and ODC services has become very bright in recent times. With all the new industries mushrooming, the future looks bright for the logistics sector in our country.

How is TCI modelling itself to keep pace with the changing transport sector environment in India?

In the present situation, a lot of companies are undergoing expansion and diversifying into new verticals. This requires entering new regions and undertaking business activities in those regions. In a way, the requirement of logistic services becomes a necessity.

Keeping with the change, TCI also has ventured into different verticals. TCI provides comprehensive road-rail-air-sea mode solutions to meet requirements. It also specialises in providing “vertical-specific supply chain solutions” to industry segments such as auto, retail, telecom, FMCG, etc., through various divisions: TCI Freight (freight forwarding), TCI XPS (express delivery solutions), TCI Supply Chain Solutions (TCI SCS), TCI Global & TCI Seaways.

TCI Freight division is fully equipped to provide total transport solutions for cargo of any dimension or product segment. It transports cargo on full truck load/ less than truck load, small packages and consignments and over dimensional cargoes.

Apart from road, the division also provides rail transportation using bulk rakes, containers etc. TCI SCS offers customised supply chain solutions to its customers. The company is playing a vital role in streamlining the logistics systems of some eminent companies in a cross section of industry segments.

The company also provides cold chain services to sectors like dairy, pharmaceuticals, grocery and so on. TCI XPS on the other hand, delivers consignments of all sizes and weights to 13,000 locations in India and 200 countries abroad.

What are the company’s expansion plans? Any plans of acquisitions or further diversification of your verticals on the card? How much investment are you looking forward to in this year and how would you be raising it?

We at TCI aim to be Rs 20-billion organization with a global and pan-Asian presence by 2010. Our thrust will be on establishing best practices and to become the preferred supply chain solution provider. Our focus will be more on value added products and services and an extensive product portfolio.

We are planning to invest around Rs 125 crore for acquisition of ships by adding a new ship every year for the next three years to our current fleet. We will invest Rs 50-60 crore for purchase of trucks and are also constructing a number of large warehouses across the country.

We have recently set up our offices in Indonesia, Hong-Kong, Singapore and Thailand. We are also looking at opening offices in China and a few European countries in the current financial year. The group is targeting a consolidated y-o-y growth of 20-25 per cent from all its strategic business units.