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National Logistics Policy will give wings to India’s logistics policy

With the National Logistics Policy, India set to expand reach, reduce costs, and shore up export competitiveness

September 19, 2022 / 11:44 AM IST
(Representative Image)

(Representative Image)

The National Logistics Policy (NLP) unveiled by Prime Minister Narendra Modi in New Delhi on September 17 aims to address two structural lacunae — high cost and inefficiency — through an overarching interdisciplinary, cross-sectoral and multi-jurisdictional framework.

It will complement the PM Gati Shakti — National Master Plan to enable seamless movement of goods and people, and reduce the cost of doing business, which should improve export competitiveness.

Better mobility via widening network of highways and expressways is expected to lower the share of logistics costs in gross domestic product to single digit from 13-14 percent now.

The NLP will focus on components such as world-class infrastructure, modern warehousing, digitalisation, regulations, tracing and tracking, ease of arranging shipment, and timeliness. With an eye on enhancing integration with regional and global value chains, it will have sector-specific logistics plans on coal, steel, fertiliser, food grains, cement, and port connectivity.

There would be four critical features: Integration of Digital System, Unified Logistics Interface Platform, Ease of Logistics Service Portal, and System Improvement Group.

Close

An annual survey on logistics across states will be conducted, focusing on three pillars — infrastructure, services, and operating and regulatory environment.

National and state master plans will identify optimal multimodal transport mix to decongest roads by promoting railways, inland waterways, and coastal shipping.

The NLP will also focus on creating a more transparent system with digitalisation, simplify trade documentation, improve the quality of warehouses across India, and stimulate regional growth.

It would help micro, small and medium enterprises, and small businesses gain access to affordable logistics. Optimal cycles will enhance efficiencies, and reduce carbon footprint, while improved industrialisation will create job opportunities at scale.

An e-Handbook on ‘Warehousing Standards’ has been created by compiling information on benchmarks for infrastructure improvement, and ways to achieve efficiency, and adopt global practices.

New eco-friendly waterways are already being set up to facilitate the movement of goods and people. As many as 40 air cargo terminals have been set up to facilitate exports, including 30 with cold storage facilities. Thirty-five multi-modal logistics facilities are being set up to help in seamless movement of goods and people across modes of transport.

The introduction of Production-Linked Incentive (PLI) scheme for drones has helped in utilisation of drones in different fields. The e-Sanchit portal for paperless processing and faceless assessment has helped Exim trade and, together with e-way bills and FASTag, improved efficiency in the logistics sector.

The NLP will also ease inter-ministerial co-ordination, which should lower costs, and envisages an Open Data Network to enable seamless connectivity.

To lower cost, the policy seeks to establish a single point of contact for all logistics and trade facilitation issues. Adoption of electric vehicles will also lower cost of operation, and carbon emissions.

The Imperatives

In India, the predominant mode of freight cargo transportation is road (about 60 percent), which is quite inefficient given poor road infrastructure, multiple checkpoints, and congestion. Unorganised and ineffective infrastructure, lack of digital adoption, under-skilled workforce, and different regulatory challenges are among the other major issues.

Aggregation of cargo movement from light commercial vehicles to medium and heavy commercial vehicles can bring down costs, and improve efficiency. Utilisation of the coastline and river network can reduce the burden on roads as these modes are more energy-efficient, eco-friendly, and come with reduced costs.

The efficiency in logistics can be improved by using India's strength in digital technologies, simplifying procedures for cargo movement, adoption of electronic channels for information exchange, tackling issues of last-mile connectivity, utilisation of technologies such as cloud computing, blockchain technology, Internet of Things, etc.

More importantly, India wants to shift its heavy reliance on road transportation for cargo movement to a combination of rail, sea, road, and air transportation.

To develop multi-modal infrastructure, India should bring the current modal mix of 60 percent roads, 31 percent rail, and 9 percent waterways to 25-30 percent roads, 50-55 percent railway, and 20-25 percent water.

For this, railways will need major capacity enhancement, with expansion of infrastructure and upgrade of technology. The freight basket needs to be diversified to enhance freight earnings and exploit idle assets to increase other earnings.

To promote inland waterways and coastal shipping, the development of navigable routes and industrial corridors should be promoted.

States will need systems and processes that integrate with the NLP for real impact at the grassroots. End-to-end logistics facilities are required to push multimodal connectivity, and decrease overall dependence on roads for freight movement.

States should be aligned with the policy by having a state logistic master plan. There should be a continued push in creating core infrastructure for the next five years. The private sector should be encouraged to participate in the infrastructure creation process.

The government should also push for asset monetisation. The private sector should be encouraged to participate in the digital push, and develop the presentation layer that will act as an interface with the end customer. Also, a standardised system for interoperability should be developed.

The NLP will ensure we stick to the course.

Jagannarayan Padmanabhan is Director and Practice Leader – Transport and Logistics, CRISIL. Views are personal, and do not represent the stand of this publication.
Jagannarayan Padmanabhan is Director and Practice Leader – Transport and Logistics, CRISIL. Views are personal, and do not represent the stand of this publication.
first published: Sep 19, 2022 11:41 am
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