The thrust on logistics comes at a time when worldwide seminal changes are being seen in the way goods are being transported. From being back-office cost centres, logistics departments are increasingly being recognised as value-drivers. With global supply chains being the new normal, manufacturing is beginning to look like sophisticated integration of just-in-time components from all over. The value-weight ratio is on the rise. Containerisation and palletisation are able to bundle discreet packages into more efficient bulk handling modes. E-commerce ambitions are about ever-increasing battles for reducing delivery times. And technical advances, from drone deliveries to seamless multi-modalism, signal the immensity of changes still waiting to happen.
A 2018 logistics performance index prepared by the World Bank put India at rank 44. The top five were Germany, Sweden, Belgium, Austria and Japan. China ranked No 26. It is around that time that serious discussions started in India about addressing the debilitating impact of logistics on the country’s global competitiveness. This resulted in the announcement of a National Logistics Policy (NLP) in September.
For India, this thrust on logistics is happening at a time when a large portion of the transportation backbone has been put in place — from greenfield expressways to dedicated freight corridors. The goods and services tax and e-way bill system have transformed the nature of transport documentation; as has on-line tracking of movements. Moreover, India’s development story is not about coastal zones, but embracing vast swathes of the hinterland as well, wherein the GatiShakti platform seeks to build the necessary connectivity.
It is reckoned that India’s logistics costs add up to around 13 per cent of gross domestic product, and the NLP targets to bring it down to 8 per cent. At 13 per cent, it may be comparable with China’s, but is quite high compared to developed economies such as the US, South Korea, Singapore, and EU member-nations, where costs are estimated to be 7-10 per cent. In an article in Business Line, Sanjib Pohit of the National Council of Applied Economic Research questioned the veracity of India’s 13 per cent estimate. He posited that this figure is from a consulting firm, Armstrong & Associates, which uses a model suited for developed economies. Professor Pohit argues that India’s current figure is already in the single digits. Be that as it may, India should ultimately build and use a model aligned to its own economy; and in the meantime, any reduction in cost is welcome.
The NLP expects this reduction through the implementation of a five-pronged strategy. One, the share of the railways is to be pushed up from the current 28 per cent to 40 per cent. Two, multi-modal logistics parks are to be set up. Three, special emphasis is to be given to inland water transportation, coastal shipping, and moving liquid bulk cargo via pipelines. Four, specific plans are to be drawn up for 15 industries that constitute the majority of bulk cargo movement. Five, digital integration is to be achieved for tracking and monitoring. Each of these five identified thrust areas come with their unique challenges.
The overall business-structure of the Railways has to change from a construct that prices itself out of freight movement at the altar of cross-subsidising passenger travel. The current emphasis on high-speed, high-volume “dedicated freight corridors” with committed time-tables, along with RORO (roll-on roll-off) options, should help enormously.
In addition, multi-modal logistics parks are to be developed by encouraging private investment in hotspots identified on the GatiShakti platform. The adoption of standardised multi-use containers is to be emphasised. From agricultural mandis to aerotropolises, modern reefer trucks and refrigerated warehouses need to be established as viable cold-chains so that India can benefit from exports of perishables and reduce domestic wastage.
The capacity and efficiency of Indian ports have improved considerably. It is reported that the average turnaround time of a container vessel has come down to 26 hours from 44 hours. But maritime freight-pricing-power needs some bold strokes. India needs its own flag-carrier shipping lines as well as its own container services. Although Parliament declared 105 riverine stretches as National Waterways, a host of difficulties have impeded water transport. These include perennial navigable channels, night navigation, and, crucially, the absence of appropriate river-ports and related connectivity to provide adequate comfort for shippers to seriously consider the shift.
The focus on 15 bulk-cargo-moving industries will be able to deliver short-term results as the logistics managers of these entities engage proactively with transporters under the aegis of this new policy. These 15 include well-known bulk commodities like cement, steel, fertiliser, coal and iron-ore.
Possibly, the single biggest impact on the sector will be the digitisation effort. A new platform called Unified Logistics Interface Platform or Ulip will offer open access to a plethora of relevant data crucial to tracking and expediting cargo movement by integrating today’s standalone e-portals of the railways, customs, aviation and commerce authorities. The commerce ministry expects this to be functional by the end of this month. Overseeing this huge repository of real-time data will be a body called the Services Improvement Group, patterned along the lines of the network planning group of the GatiShakti platform.
The outcome of all these efforts is to be monitored by a Logistics Ease Across Different States (LEADS) survey. The 2022 LEADS Report was released on October 13. In a break from the past, states are not ranked in any particular order this time but are clubbed into categories such as achievers, fast-movers and aspirers.
All this is expected to put India amongst the top 25 nations in terms of logistics efficiency by 2030, which can then surely lead to the aspiration of being amongst the top 10 by 2047, when India turns 100.
The writer is an infrastructure sector expert. He is also founder and managing trustee of The Infravision Foundation
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper
