NEW DELHI : Our government is going to launch an online logistics marketplace soon, which will seamlessly connect transporters, warehousing facilities, freight forwarders, customs, regulatory bodies and other stakeholders to have an efficient supply-chain network that will reduce average logistics costs and make essential commodities cheaper for consumers, two officials said.
This may be part of the National Logistics Policy (NLP), which will be launched by Prime Minister Shri Narendra Modi on Saturday, they added requesting anonymity. “Efficiency could reduce logistics costs for bulk items, such as agricultural produce significantly,” one of them said adding that the average logistics cost also includes movement of low-volume and high value goods such as precious metals, semiconductors and jewellery.
NLP is a necessity if we want to make India a developed economy by 2047, a second official said. Even as India is the fastest growing economy of the world, its logistics costs are quite high.
India’s logistics cost as a proportion of GDP was widely believed to be 13-14% of GDP, although several media reports last year said that a commerce ministry study commissioned to the National Council of Applied Economic Research came up with the number of 8.35%. It is around 10% for most developed countries.
However, it is important to note that there is a difference between cost and efficiency, which makes proportion of GDP an inappropriate metric to assess the competitiveness of a country when it comes to logistics. A composite measure of cost, distance, and weight, and time, distance, and weight may be better measures.
Still, anecdotally, most experts concur that logistics costs in India are high, and efficiency, in most cases, low. The policy seeks to address this, especially as India seeks to become a key part of global manufacturing supply chains, with many western countries now looking for an alternative to China.
Although India’s logistical efficiency has increased considerably in eight years due to government’s focus on capital expenditure, scope for a significant improvement is also there, the second official added.
According to the global ranking of the World Bank’s 2016 Logistics Performance, India jumped to 36th rank in 2016 from 58th rank in 2014 in terms of providing qualitative physical infrastructure. The Union Budget has raised the outlay for capital expenditure in 2022-23 by 35.4% to ₹7.5 lakh crore.
Outlining expected features of NLP, the second official said, “Integrated infrastructure development by using PM GatiShakti, electronic documentation, e-verification, impetus to e-commerce and skilling in logistics for job creations are some of the key focus.”
“This policy will help in raising farmers’ income as logistics efficiency would expand markets for farmers from Kashmir to Kanyakumari as they can sell their produce in any place where they get better price,” he said. Food grains, fruits, vegetables and other perishable will reach from farm to market with minimum wastage of time with added provision of cold-chains across the country under the policy, he added.
According to experts, India is a vast country and its logistics sector is highly complex and fragmented with multiple agencies and thousands of commodities. As per the Economic Survey 2017-18, the Indian logistics sector provides livelihood to more than 22 million people and improving the sector will facilitate 10% decrease in indirect logistics cost leading to the growth of 5 to 8% in exports.
The Economic Survey 2017-18 acknowledged that high cost of logistics is impacting competitiveness of Indian products in both domestic and global markets. It highlighted some of the issues affecting logistics efficiency such as “under-developed material handling infrastructure, fragmented warehousing, multiple regulatory/ policy making bodies, lack of seamless movement of goods across modes, lack of integrated IT infrastructure/modern technology”.
“The Indian logistics industry worth around $160 Billion has grown at a compound annual growth rate (CAGR) of 7.8 % during last five years. Logistics sector provides employment to more than 22 million people. Improving logistics sector has huge implication on exports and it is estimated that a 10% decrease in indirect logistics cost can increase exports 5-8%,” it said.
Industry is looking forward for an efficient logistical system in India through NLP. Allcargo Logistics chief strategy officer Ravi Jakhar said: “The government has rightly sensed an urgent need to transform the country’s logistics infrastructure and operational outlook to meet the rapid growth of freight movements to drive economic growth.”
“NLP will create the pathway for sustainable and inclusive economic growth by driving trade competitiveness and building cost-effective logistics networks. By developing an integrated multimodal logistics ecosystem, engineering a modal shift from road to rail, and other efficient modes, driving down the logistics cost and creating an enabling environment for enhanced digitisation and technology adoption, the NLP will facilitate improved stakeholder coordination to redefine the logistics competencies of the country,” he added.
According to Stellar Value Chain Solutions chairman and managing director Anshuman Singh, NLP will bring in an integrated and tech-enabled approach to the logistics operations. “NLP will significantly boost time and cost efficiency in the supply chain… it will make the post-pandemic economic recovery and growth sustainable and far-reaching,” he said.
Industry has been awaiting this policy along with government’s push for capital expenditure and infrastructure-driven growth, Freightfox co-founder and CEO Nitish Rai said. “Since it is being brought into force alongside the PM GatiShakti program, we are optimistic that it will become the cornerstone of logistics and transportation in the country,” he said.
Speaking about PM GatiShakti in her Budget speech on February 1, Union Finance Minister Smt Nirmala Sitharaman said, it is a “transformative approach for economic growth and sustainable development”. According to the two officials cited above, PM GatiShakti is the template on which the NLP is based. FM said the PM GatiShakti is “driven by seven engines, namely, Roads, Railways, Airports, Ports, Mass Transport, Waterways, and Logistics Infrastructure”.
“All seven engines will pull forward the economy in unison. These engines are supported by the complementary roles of Energy Transmission, IT Communication, Bulk Water & Sewerage, and Social Infrastructure. Finally, the approach is powered by Clean Energy and Sabka Prayas – the efforts of the Central Government, the state governments, and the private sector together – leading to huge job and entrepreneurial opportunities for all, especially the youth,” she said.
PM GatiShakti is a well-planned, comprehensive, and full proof mechanism to implement integrated infrastructure development worth ₹7.5 lakh crore for FY23, the officials mentioned above said. The government, which has raised its capital expenditure plans, has already announced a ₹111 lakh crore National Infrastructure Pipeline (NIP) for the next five years and GatiShakti will different ministries in integrated execution of these projects. The Commerce and industry ministry is the noddle point for implementation of the PM GatiShakti and NLP.