This month we share with you analysis of rural road networks and the cost of the last mile.
A significant challenge to the delivery of products and services into rural India is the cost of getting there. It is naturally much cheaper to move product to larger cities connected by highways where demand is easily aggregated. There is also the issue of how far settlements are from the National and State Highways – the main arteries. However for rural entrepreneurs there is another significant issue. For many the markets in the accessible surround are other villages and not cities or large towns. They live in an ecosystem where villages are scattered around the landscape with organically cut roads rather than planned road systems. Using satellite imagery of two taluks in Tamil Nadu we traced out the settlements and rural road system (not available on Google maps) and analyzed the structure of the roads. Here we show the relationship between the air distance and the road distance.
The more the road distance deviates from air distance or the distance as the crow flies, the less straight the road and the more time and energy must be expended to move product between the two points. The ratio of the Road distance to the Air distance or shortest path is thus an important indicator of the efficiency of the system since the cost of moving product by land per km of distance between two points is the Road to Air Ratio multiplied by the sum of the fuel cost and manpower cost per hour. The smaller the ratio, the lower the cost and the greater the efficiency.
In the Taluk’s we analyzed, the shortest distance between two points increased systematically as a function of air distance. In the two Taluks that we analyzed, each had n= ~120 villages resulting in (n2-n)/2 pairs of villages. The average Road Air Ratio was 1.71 for Vadipatti and 1.59 for Thirumangalam. For comparison we show the same ratio for 6 large cities in USA and India. In the United States the average Road Air ratio was 1.14, while the ratio in India was 1.22. Further, the ratios were quite consistent irrespective of the air distance between any two points.
The bottom line is that for a village entrepreneur the cost of moving their goods within local markets is about 43% higher per km than moving between cities. Much of any microfinance loan will be dissipated by the road inefficiencies.