Kushagra Khatri

Abstract

On September 17, just as cheetahs were released in Kuno, so was the national logistics policy by the Prime Minister. A much needed unified policy which binds the procedures and processes in the field of logistics together. The policy sets measurable goals in reducing transportation costs, improving international rankings and incorporates effective implementation. Riding on the tide of digitisation, the policy works towards ease of transportation for India Inc. In tandem with the PM Gati Shakti – National Master Plan, the logistics policy seeks to improve India’s trade competitiveness, create jobs and lay out the vision for India to become a logistics hub. 


Introduction

India is the world’s fifth largest economy by nominal GDP and is one of the fastest-growing economies1. The importance of logistics in enabling resilient and inclusive growth cannot be overlooked. Logistics can be defined as the “art of managing the flow of goods and services from source to user.”2 A broad term that refers to the planning, implementation, and management of the movement of goods and services from a point of origin to a point of consumption.

Complementing the PM GatiShakti National Master Plan which focuses on the creation of integrated infrastructure, the National Logistics Policy (NLP) is concerned with developing digital services and an institutional structure that enables simplification of the logistics ecosystem of India. 

Reducing costs and Improving ranking 

The newly unveiled National Logistics Policy by the Prime Minister aims to minimize costs and uproot inefficiencies which plague the sector. Currently, the cost of logistics in the economy is estimated to be 14% of the GDP compared to the global average of 8%. This creates a $180 billion competitiveness gap for India14. The policy intends to address this by driving the cost to GDP percentage to a unit figure (less than 10 percent) by 20304. Reducing time and money in transport will translate into improved competitiveness of Indian goods and services, increasing exports and accelerating growth. Efficient logistics acts as a growth driver for a rising economy like India.

The policy further sets the goal of improving India’s ranking in the Logistics Performance Index to be in the top 25 countries by 20302. In 2018, India’s rank was 445, dropping from 35 in 2016; wherein India scored less in all the 6 parameters5, which are— Customs, Infrastructure, International Shipments, Logistics Competence, Tracking & tracing and Timeliness. 

Integrating Technology

The NLP also launched a new platform2, Unified Logistics Interface Platform (ULIP), which will bring all the digital services related to the transportation sector into a single portal. It consists of 3 components6: Integration of data sources from ministries; Data exchange with private players; Unified document reference in the supply chain. Coalescing real time information and data under a single platform makes the processes easier, more effective and transparent.

The e-marketplace Ease of Logistics platform facilitates EXIM logistics by bringing service seekers and service providers on a single platform7. The new portal lubricates the process of container demand in a systematic manner with the provisions for exporters to post their requirements, thus linking exporters with logistic service providers. 

As pointed out by the PM in his speech, the government of India’s various other initiatives complement the goals of NLP. In pursuing simplification of procedures and processes, the introduction of the E-way bill in the GST regime removes the bottlenecks of check-posts8; eSanchit-ICEGATE enables faster customs clearances9; and FASTag facilitates stop-less movement. A common thread running across all three is the amalgamation of digital space with the physical interface in facilitating seamless and faster movement of goods.

Implementation 

Being a dynamic policy space, NLP incorporates data-driven decision support mechanisms2. An Empowered Group of Secretaries (EGoS) was formed to oversee and monitor the implementation of the policy. Moreover, to ensure adequate outreach and effective implementation, training courses on i-GoT and PM GatiShakti were launched. Under the Integrated Digital System, 30 different systems from seven departments are integrated—including data from the road transport, railways, customs, aviation, and commerce departments.

The Center is also preparing a draft legislation10 on logistics with the view of promoting the growth of the sector and replacing the Multimodal Transportation of Goods Act, 1993 (MMTG) with a National Logistics Efficiency and Advancement Predictability and Safety Act (NLEAPS). 

Opportunity in Complexity

The National Logistics Policy largely focuses on the soft components: procedures, regulations, and services in the field of logistics, while the complementary physical infrastructure issues are dealt with by the PM Gati Shakti Master Plan. Whereas the on-ground reality demands an effective amalgamation of the two. The basic infrastructural schemes—BharatMala, SagarMala, Dedicated Freight Corridors and the like—need reinvigorating as they are indispensable to this exercise. 

With the advent of e-commerce and e-NAM, the inventory management industry is undergoing fundamental changes. Bringing out the prominence of creating a conducive environment for warehousing is needed. As we transition toward a cleaner economy, decarbonising the transport sector is crucial in achieving our Nationally Determined Contributions. The sector must leverage the thriving culture of innovation and blooming entrepreneurial atmosphere in reinventing and improving itself.  

Reducing transport costs also has a multi-dimensional positive spillover effect. Having low transportation costs means widespread development of industries in faraway areas, leading to the upliftment of the hinterlands.  Improving the logistics sector has fruitful implications for exports, and it is estimated that a 10 percent decrease in indirect logistics costs can increase 5-8 percent of exports11. Better performance in logistics will augment programmes like Make in India and Production Linked Incentive. Furthermore, it will stimulate India’s role in the global supply chain.

Lastly

Unclogging the arteries of trade will especially strengthen the dormant primary and secondary sectors, unlocking their potential. By addressing the skewed modal share, increasing fuel efficiency, achieving a high operational ratio, and incorporating innovation, the woes of India’s transport sector can be confronted.  

The logistics in a country as vast as India are bound to be complicated and fragmented. Integrating numerous departments, agencies, and stakeholders under a single umbrella is a step in the right direction. The policy sets clear goals and creates a tangible path to follow. The logistics sector is akin to the body’s blood circulation system, critically important for growth and survival. Streamlining logistics brings India closer to realizing the goal of becoming a 5 trillion dollar economy.

References 

  1. “India’s High Growth Rate Positive News For World: IMF Managing Director.Outlook India, 21 Apr. 2022
  2. Report of the Working Group on Logistics. pp. 1–3. Accessed 23 Sept. 2022
  3. Policy Introduces Unified Logistics Interface Platform, Standardization, Monitoring Framework and Skill Development for Greater Efficiency in Logistics Services.” Press Information Bureau (PIB). Accessed 23 Sept. 2022.
  4. PM Launches National Logistics Policy.” PM Launches National Logistics Policy | Prime Minister of India, 17 Sept. 2022.
  5. “Global Rankings 2018 | Logistics Performance Index.” Global Rankings 2018 | Logistics Performance Index, Accessed 23 Sept. 2022.
  6. Unified Logistics Interface Platform (ULIP) Hackathon Event.Unified Logistics Interface Platform (ULIP). Accessed 23 Sept. 2022.
  7. Ease of logistics portal by FIEO.” Website by FIEO. Accessed 23 Sept. 2022.
  8. “Electronic Way Bill in GST.Central Board of Excise and Customs. Accessed 23 Sept. 2022.
  9. IceGate : E-Commerce Portal of Central Board of Excise and Customs.Central Board of Excise and Customs. Accessed 23 Sept. 2022.
  10. Considering to Replace Multi-Modal Transportation of Goods Act with National Logistics Law: Commerce Ministry – The Hindu, 4 July 2020
  11. Khan, Shariq. “India Can Add 8% to Its Exports If It Puts Its Last Mile Connect in the Fast LaneThe Economic Times, 22 Aug. 2019.
  12. What Is the National Logistics Policy?The Indian Express, 20 Sept. 2022.
  13. Will the National Logistics Policy Be a Game-Changer?Finshots, 22 Sept. 2022.
  14. Maitra, Barnik Chitran. “REIMAGINING INDIA’S SUPPLY CHAIN.Arthur D Little and Confederation of India Industry (CII), Dec. 2020.

About the Contributor

Kushagra Khatri, Research Intern, IMPRI

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