National Logistics Policy: Will it Reduce Costs & Improve Competitiveness of India

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The Prime Minister of India, Shri Narendra Modi has announced the National Logistics Policy on September 17, 2022 with the key objectives to ease and accelerate the movement of goods, giving a boost to trade sector by minimising the cost of logistics which stands around 13 to 14 percent at present, and to enhance the competitiveness of India among top exporting countries.   Incidentally, the National Logistics Policy was launched on the day of bringing Cheetahs to India. On the launch of the policy, the Prime Minister emphasized that goods should move fast like a cheetah so that the present logistical costs which run around 13 to 14% of India’s GDP, almost double of the costs in developed countries, can be minimised to improve India’s competitiveness in exports.  

 

Need for the National Logistics Policy (NLP)
India’s logistics sector has a complex regulatory environment due to multiple regulations governed by various stakeholders. There are over 20 government agencies; 37 export promotion councils; 500 certifications; 200 shipping agencies; 36 logistics services; 129 Inland Container Depots and 168 Container Freight Stations through which the movement of goods happens. The logistics sector is also heavily dependent on road transport. There is also a low level of technology adoption among various stakeholders. The high indirect costs due to unpredictable supply chains and poor first and last mile connectivity add to the high logistics cost.

 

To overcome these problems which are crucial to trade including transport services for the movement of goods, storage facilities that are particularly essential for trade in perishable goods such as food items, fruits, and vegetables, and smooth functioning of government services that facilitate trade such as licensing and customs, the need was felt to launch the National Logistics Policy for faster movement of goods. In October 2021, at the launch of the PM Gati Shakti-National Master Plan for multi-modal connectivity,  PM Modi had said: “According to a study, the logistical cost in India is about 13% of GDP. Such a situation does not exist in developed countries. Due to high logistical cost, the competitiveness of India’s exports is greatly reduced”. 

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 Besides, India is ranked very low among the exporting countries due to the high costs of Logistics. In 2018, India was ranked 44th in the World Bank Logistics Performance Index, a measure through which the Bank ranks countries based on their logistics performance. While India currently records relatively higher logistics costs at 13-14 per cent of the GDP, it is much lower at 7-8 percent for most of the developed economies. The Logistics sector is highly fragmented and unorganised. Accordingly, the Government of India has decided to launch the National Logistics Policy (NLP)

 

National Logistics Policy: Key Features
The new logistics policy has four features: Integration of Digital System (IDS); Unified Logistics Interface Platform (ULIP); Ease of Logistics (ELOG); and System Improvement Group (SIG). Under the IDS, 30 different systems of seven departments are integrated – including data from the road transport, railways, customs, aviation and commerce departments.

 

A Unified Logistics Interface Platform ULIP will, according to the Prime Minister, Shri Narendra Modi, “bring all the digital services related to the transportation sector into a single portal.” A new digital platform Ease of Logistics Services (E-Logs) has also been started for industry associations to resolve issues by reaching out to the government.

 

National Logistics Policy (NLP): Key Objectives
The policy aims to enhance logistics sector competitiveness through a unified policy environment. The National Logistics Policy, is the logical next step to provide a comprehensive agenda to develop the entire logistics ecosystem with two major visions. The first is to reduce logistics cost in India by 5 per cent of GDP over the next five years. The second is to improve India’s ranking in the Logistics Performance Index. It also aims to enhance logistics sector competitiveness through a unified policy environment and an integrated institutional mechanism.

 

The NLP seeks to pave the way for India to become a logistics hub by providing seamlessly integrated multiple modes of transportation by leveraging technology, processes and skilled manpower.

 

The last year launch of PM Gati Shakti scheme which envisages efficiency in services like processes, digital systems and regulatory framework also aims to improve the movement of goods.   

  

Key Steps being by the Government to Improve Logistics
Since 2014, when the Modi government came to power, there has been much emphasis on improving logistics, through initiatives like Sagarmala for shipping, Bharatmala for road and UDAN for aviation. In October 2021, PM Gati Shakti was launched as a National Master Plan for multi-modal connectivity to bring together 16 ministries, including railways and roadways, for integrated planning and coordinated implementation of infrastructure connectivity projects.

 

FASTag for electronic toll tax collection and faceless assessment for customs is also a key step to accelerate the movement. In terms of scale, the biggest of these plans is the Gati Shakti master plan, and the PM said: “A huge amount of information related to different infrastructure projects of state governments has been prepared. Today, data from the central and state governments in about 1500 layers are coming on the PM Gatishakti portal”.

 

A single platform was launched for ministries to monitor the progress of various infrastructure projects. Later, the PM said the Centre was aiming at adding over 200 airports, helipads, and water aerodromes where aircraft can land, over the next 4 to 5 years, besides nearly doubling the existing natural gas pipeline network of around 19,000 km.

 

Ease of Logistics in India: Top States
In a Ministry of Commerce and Industry survey last year, titled ‘Logistics Ease Across Different States’, Gujarat, Punjab, and Haryana were ranked as the top three states. The parameters included to measure the Ease of Logistics were, the quality of road and railways infrastructure, road freight rates, quality of warehousing infrastructure, among others. The survey suggested that states should focus on areas such as developing sector-specific skilling infrastructure and streamlining logistics-related approval and clearance processes.

 

National Logistics Policy: An Important Initiative to boost Economic Growth

  • For the first time, the $200 billion logistics sector has been given the attention it deserves. The policy is an example of inter-ministerial collaboration and will help in integrating the supply chain.
  • NLP include Integration of Digital System (IDS), Unified Logistics Interface Platform (ULIP) and Ease of Logistics (ELOG).
  • The IDS integrates 30 different systems from seven departments, including data from road transportation, railways, customs, aviation, and commerce.
  • The Unified Logistics Interface Platform will enhance visibility for customers and enable logistics companies to adopt digitisation on a much larger scale
  • The policy will spur investment across the logistics sector.
  • The stakeholders feel there has to be alignment of the policy across all States to be effective.  
  • In terms of the Logistics Performance Index, India was ranked 44th in the last edition of the index, released in 2018. During a press brief, the Information and Broadcasting minister stated that now the target is to be among the top 25 countries by 2030
  • The Unified Logistics Interface Platform (ULIP) is expected to bring all digital services related to the transportation sector into a single portal. In other words, it will allow for integration with existing ministry data sources as well as data exchange with private players.
  • ELOG is a digital dashboard that is being developed by the industry department for registering, coordinating, and monitoring time-bound issue resolution. It will include timelines and the status of the resolution.
  • Additionally, a new digital platform called Ease of Logistics Services (E-Logs) has been launched to help industry associations resolve issues by contacting the government.
  • Under NLP, two groups will be set up to improve the coordination across the ministries and between state and central government. These are the Network Planning Group (NPG) and the Service Improvement Group (SIG)
  • The trade sector is confident that an empowering provision will follow soon for effective implementation of the policy at ‘cheetah’ speed.

Industry Leaders support NLP
After the NLP was announced, the response on National Logistics Policy has been positive from stakeholders.

  • Rampraveen Swaminathan, MD and CEO, Mahindra Logistics, said the NLP comes as a big boost for the sector as it aims to promote seamless movement of goods across India and potentially could lead to a reduction in the cost of logistics and accelerate GDP growth
  • Kami Viswanathan, Senior Vice President, FedEx Express, Middle East Indian Subcontinent and Africa (MEISA) Operations said As India looks to modernise infrastructure and supply chains, it’s evident that technology is the key to unifying all involved stakeholders and to help manage complexity better” and added that they welcome the government’s this initiative as the development of an integrated and efficient logistics ecosystem will be a crucial enabler for India to become a $5 trillion economy. She also believes that it will improve trade competitiveness.
  • Rajesh Kapase, CEO of Trackon, said that NLP will improve efficiency in cargo clearance movement thereby bringing in efficiency in cargo movement, as well as also reducing cost and this will directly boost the economic growth as competitiveness in the export business will increase substantially. He said, “ If things work out as planned, NLP would also bring down the fuel costs dramatically thereby allowing logistics companies to pass on the benefits at the last mile delivery to the end consumer. In a way, with NLP in place, prices of commodities and other consumer goods are likely to go down”
  • Gautam Kumar, COO & Co-founder of FarEye, with India’s growing SMB market said “Leveraging technology would ensure that products made in the country get visibility and access in global markets- a massive boost for the nation’s ‘Make in India’ policy. This would also enable them to sell their products at a global scale.”
  • Uddhav Kumar, CEO of Lynkit Solution Pvt Ltd, said that the first objective is being achieved from open APIs and integrations with government portals like ULIP — a unified platform for logistics service providers and the second is being done by the introduction of new systems like e-Logs, a single portal for all grievances that would then allow for quick inter-ministerial intervention. This would solve a huge problem as most of the issues would involve not one, but up to 5 different ministries and the issues would just get lost. He believes that transparency is being achieved via the Gati Shakti which combines 1500 data layers on a single map.

Although Udit Sangwan, co-founder of Agrigator said it is still too early to say about implementation and impact on the Agri supply chain and benefit to stakeholders involved in this, but he is optimistic and said “This policy will reduce friction in cross-border transactions as policy aims to use robust infrastructure and technology to support a fast-growing Agri economy.” 

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