Decoding National Logistics Policy

Launched on September 17, the much-awaited National Logistics Policy framework caters to all key stakeholders across the country’s vast yet fragmented logistics landscape. Notably, the government’s latest policy comes with a Comprehensive Logistics Action Plan (CLAP), which details the Policy’s specific targets. These include reducing India’s logistics cost to be comparable to global standards by 2030 and aiming to be among the top 25 countries by 2030 in the Logistics Performance Index (LPI). The Policy focuses on areas such as process re-engineering, digitisation, and multi-modal transport. It is a crucial move as high logistics cost impacts the competitiveness of domestic goods in the international market. Being the fifth largest economy in the world, India aims to be among the top 10 in Logistics Performance Index by 2030. As India aims to become a US$5 trillion economy by 2024-25, connectivity and superior infrastructure will become more critical.

The need for the Policy was felt since the logistics cost in India is high as compared to other developed economies. It is imperative to reduce the logistics cost in India to improve the competitiveness of Indian goods, both in domestic as well as export markets. The Policy’s target is to ensure that logistical issues are minimized, exports grow manifold, and small industries and the people working in them benefit significantly.

Why the need for logistics policy

The logistics cost in India is high as against 9-10 per cent in the USA and Europe and 11 per cent in Japan. There is no single department, which manages the sector as it is currently being managed by many ministries, including road transport, shipping, railways, civil aviation, posts and commerce and industry, and finance. According to the Union Commerce Ministry, the sector is complex with over 20 government agencies, 40 partner government agencies, 37 export promotion councils, 500 certifications, 10,000 commodities, and a market size worth over US$160 billion. It also involves 200 shipping agencies, 36 logistics services, 129 Inland Container Depots, 168 Container Freight Stations, 50 IT ecosystems, banks, and insurance agencies. The sector provides livelihood to more than 22 million people and, improving it will facilitate 10 per cent decrease in indirect logistics cost leading to the growth of 5 to 8 per cent in exports, the ministry stated. As per estimates, the worth of Indian logistics market is over US$200 billion.

Key building blocks:

Digital Integration System: It will lead to seamless and faster workflow, making logistics significantly more efficient.

ULIP: It aims to collapse all logistics and transport sectors digital services into a single portal, thereby freeing manufacturers, and exporters from the current tyranny of long and cumbersome processes.

Ease of Logistics Services: E-logs, a new digital platform, will allow industry to directly take up operational issues with government agencies for speedy resolution.

Comprehensive Logistics Action Plan: The Comprehensive Logistics Action Plan comprises integrated digital logistics systems, standardisation of physical assets, benchmarking service standards, human resource development, capacity building and, development of logistics parks.

Way Forward

The rail sector suffers from many structural deficiencies, which must be eliminated fast if the logistics cost must be brought to global standards. The average speed of a freight train has stagnated at 25 kmph for decades—it should urgently be doubled to 50 kmph.

The railways need to have a timetable-based goods operation. It must become an aggregator at the source of freight, and disaggregate at the destination, to capture the high-value small-load business. For decades, the country has talked about eco-friendly and cost-effective inland waterways freight movement, but nothing has happened so far.

There is valuable learning available from the river ports of China, who highlight developing port infrastructure. Road logistics is a fragmented sector, where a large chunk of truck owners have a small fleet. There is a clear case for the aggregation of small operators with government-supported aggregation apps. Similarly, there is a need for large players in the sector to bring costs down. Apart from improvement in key functional areas, the size of Indian Ports must grow manifold—it is not without reason that 10 of the world’s top 20 ports are in China. It is time to give wings to air logistics and drastically improve the transport of high-value and perishable items.

The author is Piyush Kumar Singh, logistics trade specialist