Prime Minister Narendra Modi is expected to announce the new National Logistics Policy on September 17 as the sector seeks support for faster growth after two pandemic-ridden years.
The upcoming policy is not only expected to streamline rules and address supply-side constraints but will also help provide a roadmap to reduce fuel costs and lower logistics costs.
But what is the national logistics policy?
The Central government has been working on the National Logistics Policy for three years. The commerce ministry released a draft logistics policy for consultation in 2019, but it was delayed by the Covid-19 pandemic.
The National Logistics Policy was once again announced by finance minister Nirmala Sitharaman in the Budget for 2022-23.
“The national logistics policy will clarify the roles of the Union government, state governments and key regulators,” Sitharaman said in her speech. “It will create a single-window e-logistics market and focus on the generation of employment, skills and making medium and small enterprises competitive.”
According to the draft policy, the government will create a single point of reference for all logistics and trade facilitation matters, reducing costs for the logistics sector to 10 percent in five years. The logistics sector is estimated at 13-14 percent of GDP.
According to the draft policy, India will move away from the high dependence on road transport for cargo movement to a mix of rail, shipping, road, and air transport.
“The NLP will streamline and provide a roadmap to the government’s plan to transport 50 percent of all cargo in the country through the Indian Railways and it will also help reduce congestion on Indian roads and help reduce India’s crude import bill,” a senior government official said.
A committee with government and industry officials is expected to be set up to identify ways to help improve cargo movement in the country.
The government will develop multimodal infrastructure across the country under the policy, which is also aimed at helping to double farmers’ incomes by reducing wastage during the transportation of food.
What are the expectations?
India’s logistics companies have been waiting for the policy for the past few years, especially in the aftermath of the pandemic.
According to research reports, the size of the Indian logistics market is $215 billion and it is growing at a compounded annual rate of 10.5 percent. However, only 10-15 percent of the overall market is organised.
Assocham's immediate past president Vineet Agarwal expects the policy to address prevailing concerns in India’s logistics sector from an international lens. He added that a comprehensive national policy for the logistics sector is critical as it will help the country understand how it can reach its economic goals.
Agarwal said the NLP should increase standardisation, reduce informalisation, improve digitisation, and become competitive in the international market.
“The policy should help integrate local supply chains with international supply chains better,” Agarwal said.
Arindam Guha, leader and partner for government and public services at Deloitte India, said the NLP will aim to increase the movement of cargo through the Indian Railways in a combination of additional infrastructure investments and formalising and mobilising the supporting ecosystem and also enabling single-window approvals.
Guha added the main challenge of the NLP will be to address subjects that are divided between the Centre and the states.
Ravi Jakhar, chief strategy officer at Allcargo Logistics, said the focus on building integrated infrastructure to enhance connectivity will eventually reduce the cost of carrying cargo and increase operational efficiency.
“The NLP will also bring in global standards in warehousing infrastructure and operations by facilitating technology integration,” Jakhar said.
Ketan Kulkarni, chief commercial officer of Blue Dart, expects the NLP to expand India’s global connectivity and increase shipments in and out of the country.
He said the NLP will aim to reduce high transaction costs in India and will provide a stimulus to trade while enhancing export competitiveness and giving a push to the MSME sector through cost-effective logistics.
Uttam Digga, cofounder of Porter, expects the NLP to integrate the digital systems of departments such as road transport, railways, customs, and aviation and introduce a Unified Logistics Interface Platform, which will enable smooth cargo movement.
