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India slashing logistics costs to power growth

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NEW DELHI : India’s logistics cost, currently well above that of major economies such as the US, China and the EU, is set to become very competitive in about five years with massive efficiency gains to the economy and last mile connectivity to people even in remote areas, central ministers said at the Mobility Conclave 2022 on Thursday.

The build-up of infrastructure investment in the country is resulting in improved mobility which is set to bring about big savings for the economy with logistics cost set to come down to 10% from the current 16-18%, Union Minister for Road Transport and Highways Shri Nitin Gadkari, the Chief Guest at the event, said.

Multiple ministries are making coordinated effort under the Prime Minister’s Gati Shakti mission in transforming mobility and building modern infrastructure, a key element of India’s economic revival strategy due to its multiplier effect.

Railway Minister Shri Ashwani Vaishnaw, who was present on the occasion, pointed out in his special address that sustaining increased capital spending, embracing new fuels like hydrogen and increasing the share of Railway in goods transport with the idea of lowering logistics costs were top on the agenda.

Civil Aviation Minister Shri Jyotiraditya Scindia said in his special video address at the conclave that air travel is becoming a more common mode of transport with growth increasingly coming from smaller cities unlike earlier when travel between metro cities and foreign travel drove growth. An approach to make mobility more accessible and to ensure last mile connectivity is the focus of the government, especially in border towns, the minister said.

The conclave captured the mobility revolution taking place in the country which has a strong bearing on long term economic growth by way of making transportation more economical, efficient and sustainable.

Gadkari said bringing India’s logistics cost to around 10% would make it comparable with around 11-12% in Europe, around 10% in the US and below 10% in China. The minister said use of renewable energy including ethanol, electric mobility and liquefied natural gas (LNG) fuelled trucks will all reduce the cost of transportation aided by an improved road network and interconnect between various modes of transport. This would also improve mobility, he said.

“Today the cost of transportation is very high. If we are able to reduce logistics cost to 10%, our exports would also rise one and half times,” the minister said.

Railway Minister Ashwani Vaishnaw said the public carrier will step up its investment with at least ₹three lakh crore a year capital allocation expected from next year onwards.

“India should be investing significantly more into railways. We have to invest ₹3 lakh crore consistently to meet the aspiration of the people and lower logistics cost in the country. If you look at competing economies, they have been investing around ₹9 lakh crores for the last 30 years,” Vaishnaw highlighted.

The Indian Railways saw a 14% jump in capital expenditure to ₹2.45 lakh crore in the financial year 2022-23 from ₹2.15 lakh crore in the last financial year. A higher capex push could boost railways efforts to revamp its operations.

Vaishnaw informed that the first hydrogen train in India could be operationalised by August 15 next year. The Railway minister highlighted that India’s share of railways in overall transport of goods has been falling since 1950 which is the prime cause that the cost of logistics is so high in the country.

India’s telecom market has the potential to attract new players now that the government had undertaken significant reforms for improving the financial health of the sector, said Vaishnaw, who is also the minister for communications and electronics and information technology.

Comparing the growth rates in the aviation sector with air-conditioned train travel, Scindia said that air travel was increasingly becoming a common mode of transport.

“Though it was a sector in its infancy in earlier days, we are now going through a very major growth phase in civil aviation in India,” the minister said.

Source : Mint

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