Transportation Hidden Costs
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The physical distribution component of a major project, including transportation of raw materials, project materials, machinery and equipment and such as infrastructure facilities as roads, vehicles etc., usually accounts for 20 to 30% of the total capital cost.
The general scarcity of various goods, unpredictable nature of the economy and economic behavior , on the part of the business community and the bureaucracy in India make it all the more necessary for one to plan well ahead. In fact, planning of transportation and infrastructure must be done well ahead of general planning, so that resources spent on other parts of the project do not result in useless expenditure.
E.g.: Trucks get stuck in muddy roads, work sites remain unapproachable, and serious vehicular accidents are caused near the project areas.
Due to delays caused by transportation of goods and materials, the capital cost of the project increases. The interest amounts on loans taken build up. Such increase in the cost of the project if attributed or apportioned to inadequate transportation, would constitute one of the hidden costs for which transportation is responsible.
In India, Project authorities generally do not hold themselves responsible for the transportation bottlenecks and resulting delays. These delays are due to non-receipt of equipment, machinery, raw materials etc. and these delays generally run into months. Due to such delays, the project suffers heavy losses, which occur because of congestion in the ports, traffic jams, railway restrictions etc. Hence proper and realistic planning with regard transportation is very necessary in our country, not just for controlling the hidden costs but also for the smooth completion of the project. .
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