Highways and Headwinds: Infrastructure Push in Logistics Industry is an Opportunity at a Price, Says TCI MD

India's evolving logistics industry presents both challenges and opportunities for operators like Transportation Corporation India. While improvement in the road infrastructure has improved connectivity, enhancing operational capabilities, it has come with financial implications. "The investment has also come at a little bit of a price. Toll costs have gone up substantially in the last few years," Managing Director of TCI Vineet Agarwal told in an interview with Outlook Business.

These rising toll expenses, combined with broader inflationary pressures, have increased operational costs despite relatively stable fuel prices. According to a report by Wright Research, India's logistics spends amounting to around 13% to 14% of its GDP stands above the world average.

Nevertheless, Agarwal remains optimistic about future prospects. At some point, there will definitely be some stability in terms of cost and the infrastructure up-scaling will start positively impacting more as it will help in increasing throughput, among other things, he said. “That is starting to play out now as we see on the long-hauls." However, there is some congestion in short-haul movement such as in cities, etc., which delay movement, he noted, adding “…but net-net, we should start seeing benefits in the next few years.”

A report by IBEF, citing the World Bank estimates, stated that the delays in movement of freight by trucks due to checkpoints and other bottlenecks impose a significant economic cost on India, ranging from $108mn-$276mn. The gap in efficiency in road freight movement with global benchmarks also remains stark. According to Wright Research, trucks in India travel nearly 300 kilometres per day compared to the global benchmark of 500-800 kilometres per day.

However, TCI's leadership sees some improvement on the horizon. "The hub-to-hub movement, which is the long distance, is starting to improve also because the highways are getting better", particularly as highway development reduces wait times at tolls through systems like FASTag, Agarwal said.

Strategic Modal Mix

While TCI is expanding its rail freight operations, the company has deliberately avoided entering the air logistics space. Agarwal cited high carbon emissions, elevated costs, and limited growth potential as key factors behind this strategic decision. He explained that while air logistics previously helped bridge gaps, improved road infrastructure has moderated its growth prospects.

India's inland waterways remain significantly underdeveloped, according to Agarwal, and thus is not a viable option for diversification. The solution lies in adjusting the current model mix where only about 25% of freight moves by rail. "This number needs to change for sure. The more we move towards rail and coastal shipping, that will make a big difference," Agarwal said.

The company has already benefited from the development of dedicated freight corridors, with Agarwal noting improved transit times. "Sometimes some seasons we see really fast movement and some seasons is slightly lower. But yes, it's definitely better," he said. Even IBEF advocated for this shift, arguing—to reduce the logistics cost, it is crucial to bring railways back into the picture as a preferred mode of transportation.

Even the seaways segment has come out as a profitable division for TCI, with an stellar EBITDA margin of 44.8% in the March quarter of FY25, 470 basis points more than the year-ago quarter. However, this vertical has with its own challenges as the growth for FY25 was limited to just 12%.

"Growth in the segment is based on how much capacity one is able to increase and how many ships we are able to add," Agarwal explained, highlighting current market constraints. To that effect, he said that ships are not easily available right now in the market and the company is actively searching for vessels to expand its fleet. TCI has allocated Rs 135 crore as capex towards ships for FY26. TCI currently operates six domestic coastal ships with a capacity of 79,000 dead-weight tonnage and owns over 8,500 multi-purpose marine containers.

E-Commerce Strategy and Capex Plans

Despite the explosive growth in e-commerce and quick commerce sectors, TCI maintains its strategic focus on backend operations rather than last-mile delivery. "We do quick commerce replenishment, which is essentially running backend warehouses for some companies," Agarwal explained, confirming the company has no plans to enter the last-mile delivery segment in quick-commerce industry.

The company is planning to spend Rs 400 crore-Rs 450 crore as capital expenditure in the ongoing financial year, Agarwal said. About Rs 132 crore of the total capex for FY26 will be directed towards hubs and warehouses and Rs 128 crore will be employed towards trucks and rakes, according to the investor presentation.