Disaggregate study of mode choice for inland movement of export cargo containerized on sea

Abstract

Containerized mode of transport, by ensuring smooth and seamless movement of cargo, has become the predominant means of export of general cargo by sea. It adds value to the shipper by ensuring door to door delivery with faster transit, low cost, and less damages compared to break bulk movement. Further, by facilitating multimodal movement. Containerization has also accelerated the non-physical aspects of cargo flow such as movement of title, flow of cash and liability regime, and has helped completion of foreign trade formalities at inland points directly. These changes have altered intermodal competition in the inland segment that needs to be considered by the carriers for movement of export cargo. Review of literature, however, shows that existing models of freight transport have not addressed the role of containerization on intermodal competition in the inland movement of export cargo. In the Indian context, having identified containerization and multimodal movement as one of the key issues in developing export competitiveness, policy makers sponsored a number of studies for developing containerization and its spread to hinterland focusing on the supply side factors. A few studies conducted to analyze the demand were primarily descriptive in nature and did not explicitly model the competition between different modes of competition. Fixation of prices of freight services by rail, administered by policy, has drawn considerable attention in recent times. Indian Railways, assuming an inelastic demand. Prices freight services much above the marginal cost. Empirical validity of the assumption, tested even in a limited context, would be a guide for policy makers in pricing rail transport services. The objective of this research is to analyze the dimensions of intermodal competition in movement of export cargo containerized on sea (ECCS) from hinterland areas to ports. To achieve the above objective, the research questions being addressed are; 1 What are the critical determinants of mode choice in the inland movement of ECCS? 2. What implications do the results suggest for carriers and policy makers in the inland movement of ECCS? As the options faced by an exporter are discrete, the models used to describe freight transport mode choice usually adopt econometric models of qualitative choice. Consequently, this study also adopted these models for the study using the frequency of choice of a mode of transport as the dependent variable. Independent variables consist of attributes of the modes of transport, characteristics of the product and export firms. Data were collected in the following stages: ' 1. A three-stage field study was conducted to develop the instrument for data collection. 2. Data from 124 export firms were collected using the instrument. 3. Additional data on modal attributes were collected separately from the transport firms. Using the above data a nested logic model with rail container and road truck in one branch and road container in a different branch was found to predict the mode choice behavior of exporters best. Amongst the modal attributes total transport cost and total transit time were found to be influencing the modal choices significantly. it was also found that firms with heavier cargo, firms capable of enchasing letter of credit at the inland points, fim1s located near terminals with more frequent train services, and export firms with low per cent of urgent orders would move cargo by rail in containers to ports. Firms with higher post export benefits would move the cargo by trucks and firms with valuable cargo would move the cargo by containers and preferably by road. , The model indicates that an exporter‘s decision to containerize is often conditioned on the mode choice. This implies that value added by containerization is unable to offset the costs due to transportation_ The time value of cargo, defined as the ratio of coefficients of transit time to price. indicating the opportunity cost of time. is found to the high. The high time value of cargo points to an exporter‘s willingness to pay higher amounts For service quality improvements. The study also shows high price elasticity and presence strong intermodal competition Policy makers, to achieve the stated objective of increasing penetration of container services should explore ways of improving value addition to the export process. This is possible by enabling spread of multimodal transport regime which is currently insignificant. The policy interventions identified crucial for promoting multimodal transport are the changes in the existing legal framework and provision of a backbone communication channel to encourage inter-organizational cooperation in providing multimodal services. As shippers are more sensitive to total transport cost, carriers can capture more traffic through price reductions. Hierarchy in decision making and commodity specificity in choice of mode indicate that. before planning new l6IT1'lil'l8iS, policy makers and terminal operators should study the interaction of the product attributes and the characteristics of modes of transport to assess the potential at a location. Our study, in a limited context disproves the assumption of inelastic demand for Freight transport by rail.