Prime Minister Narendra Modi launched the National Logistics Policy that aims to address challenges facing the transport sector and bring down the logistics cost of businesses. He said the policy aims to expedite the last-mile delivery, helping businesses save time and money.
Ranking of India
In 2018, India was ranked 44th in the World Bank Logistics Performance Index, a measure through which the Bank ranks countries based on their logistics performance. India currently records relatively higher logistics costs at 13-14 per cent of the GDP while it is 8-10 per cent for most of the mature economies. The sector is highly fragmented and unorganised.
Background
Since 2014, when the Modi government came to power, there has been much emphasis on improving logistics, through initiatives like Sagarmala for shipping, Bharatmala for road and UDAN for aviation. In October 2021, PM Gati Shakti was launched as a National Master Plan for multi-modal connectivity to bring together 16 ministries, including railways and roadways, for integrated planning and coordinated implementation of infrastructure connectivity projects.
Objectives
The PM Gati Shakti scheme envisages efficiency in services like processes, digital systems and regulatory framework. The National Logistics Policy, launched by Prime Minister Narendra Modi on September 17, is the logical next step to provide a comprehensive agenda to develop the entire logistics ecosystem with two major visions.
The first is to reduce logistics cost in India by 5 per cent of GDP over the next five years. The second is to improve India’s ranking in the Logistics Performance Index. It also aims to enhance logistics sector competitiveness through a unified policy environment and an integrated institutional mechanism.
The policy seeks to pave the way for India to become a logistics hub by providing seamlessly integrated multiple modes of transportation by leveraging technology, processes and skilled manpower.
Let’s have a look at India’s logistics sector
- The logistics sector is the backbone of economic growth in India and is one of the most important accelerators of trade.
- Logistics has been given special focus in the last few years, and many measures in terms of hard and soft infrastructure have been taken to improve the logistics scenario of India.
- According to the commerce ministry, while the Indian logistics sector has been growing at a compound annual growth rate (CAGR) of 10.5 per cent, reaching about $215 billion in value during 2020, there are systemic, interconnected problems that must be addressed to enhance its efficiency.
- Comprehensive logistics costs amount to almost 14 per cent of India’s gross domestic product, which is higher than other countries in the world.
Significance of National Logistics Policy
- National Logistics Policy has been developed after wide consultations with all central ministries on the supply and demand side and takes a comprehensive view of the sector defining specific action points with the key objective of matching and improving upon global standards in logistics efficiency and to integrate with global supply chains.
- Closing India’s competitiveness gap vis-à-vis the global average of 8 per cent, would make the Indian logistics sector advanced, organised and efficient, on par with global peers with the ambition of being amongst the top-25 countries in the global Logistics Performance Index (LPI).
- Reduced logistics cost improves efficiency cutting across various sectors of the economy, encouraging value addition and enterprise.
Highlights of the policy
- While development of integrated infrastructure and network planning is envisaged to be addressed through the PM Gati Shakti National Master Plan, for efficiency in services (processes, digital systems, regulatory framework) and human resource, the National Logistics Policy is the logical next step. This will provide a comprehensive agenda for development of the entire logistics ecosystem.
- The vision of the policy is to develop a technologically enabled, integrated, cost-efficient, resilient, sustainable and trusted logistics ecosystem in the country for accelerated and inclusive growth.
- The policy will streamline rules and address supply-side constraints as well as provide a roadmap to reduce fuel costs and lower logistics costs.
- The policy aspires to reduce cost of logistics in India to be comparable to global benchmarks by 2030 and create data driven decision support mechanism for an efficient logistics ecosystem.
- Elements of the policy like Unified Logistics Interface Platform (ULIP) and Ease of logistics Services (E-Logs) would help exporters and industry in enhancing logistic efficiency.
- The ULIP will bring all the digital services related to the transportation sector into a single portal, freeing the exporters from a host of very long and cumbersome processes.
- Similarly, E-Logs portal has also been started, through which industry can directly take up any such matters which are causing problems in their operations and performance with the government agencies.
- The policy will be implemented through a Comprehensive Logistics Action Plan (CLAP). The interventions proposed under the CLAP are divided into eight key action areas.
i) Integrated digital logistics systems
ii) Standardisation of physical assets and benchmarking service quality standards
iii) State engagement
iv) Human resource development and capacity building
v) Export-import logistics
vi) Sectoral plans for efficient logistics
vii) Service Improvement framework
viii) Facilitation of the development of logistics parks.
- Under human resource development, the focus would be given to mainstream logistics in higher education, and the development of online training programmes.
- Under export-import logistics, the focus would be on addressing infrastructure and procedural gaps, and developing institutional mechanisms for trade facilitation.