To understand how the national logistics policy will be a game changer for the Indian economy we first need to understand the problems associated with the logistics industry of India.
Now if you look at the cost of transporting one metric ton of goods in India it costs 18 rupees per metric ton per kilometre by air, by road its 3.6 rupees and by rail which is by far the most economic mode of transport with just 1.6 rupees per metric ton per kilometre. So by the look of it obviously a large chunk of goods must be shipped by rail right, well guess what, around 71% of goods in India are shipped by road and only 17.5% of them are shipped by rail. Similarly only a small segment of trade is done through waterways.
The question is why?
That’s because India lacks sufficient tracks and trains to meet the demand of the volume of products being transported.
Secondly both passenger and goods train in India run on the same tracks with the passenger trains being given more preference over the goods train. This results in delays.
Thirdly when you need to ship something by rail you need to opt for a multi-modal transport for last mile and first mile connectivity as in you will have to ship your product from the factory to the train by truck then unload and load it then get shipped to a particular location and then drop it off at your warehouse before having another truck pick it up.
Current status of India’s logistics business.
According to the team of Udaan which is a B2B trading platform, India currently lacks the infrastructure to seamlessly move the goods from a truck to the train.
Secondly let alone on the time of arrival they said that the security via rail is so low that there’s not even a guarantee that your product will reach the destination safely. There is problem of theft, rash handling and no tracking facility at all. As far as inland waterways is concerned it involves a lot of approvals and certifications from different segments of government that are neither connected nor modernized for fast processing.
The interesting information we discover is that there are more than 20 government organisations, 37 export promotion councils, 500 certificates, and 10,000 commodities in India’s logistics business.
So in short you will spend more time in getting certifications than you will in actually shipping or producing the product itself.
But how will India’s National Policy fix it?
What is National Logistics Policy?
The National Logistical Policy is a comprehensive framework for integrating different logistics operations and stakeholders in the nation to ensure the smooth and economical flow of goods and services.
National Logistics Policy is unveiled by PM Modi
On September 21, 2022, the National Logistics Policy (NLP) was published by the Ministry of Commerce and Industry under the capable leadership of Prime Minister Mr. Narendra Modi.
The policy was written with the intention of addressing the different difficulties the Indian logistics industry faces. By lowering logistics and transportation costs, the policy also aims to give the Make in India movement a boost.
Current major hurdles in the Indian logistics that are pulling India behind
- Inadequate knowledge
The lack of knowledge about the National Logistics Policy as a whole is one of the major obstacles to its implementation. All parties, including companies, logistics service providers, and policymakers, need to be made aware of the issue.
- Ineffective coordination
The National Logistics Policy’s execution is significantly hampered by the lack of coordination and cooperation among the numerous stakeholders. Transport companies, governing organisations, logistical service providers, GST authorities, etc. are a few of the various stakeholders. To facilitate the successful execution of the policy, a platform must be created where all of these stakeholders may communicate and collaborate.
The fact that no single ministry or organisation is in charge of carrying out the policy presents another difficulty.
A number of ministries, including the Ministries of Commerce and Industry, Road Transport and Highways, Railways, etc., have developed the policy. This makes it challenging to keep an eye on and track the policy’s development. The policy’s lack of specified goals or implementation deadlines presents another difficulty. Because of this, evaluating the effectiveness of the policy is challenging.
The National Logistics Policy is a positive start toward increasing India’s logistics’ effectiveness. However, how well the various issues are resolved will determine how well it is implemented.
- Lack of uniformity
The absence of uniformity in the logistics sector presents a significant obstacle to executing the National Logistics Policy.
This is a result of the industry being highly fragmented, with many small and medium-sized firms (SMEs) engaged in the sector. Because of this, creating and implementing industry-wide standards and procedures is challenging.
Lack of qualified workers in the logistics industry is another issue. This is a result of the fact that the majority of logistics firms in India are owned and operated by families and have been for many generations. As a result, there aren’t many formal education and training programmes available for workers in the logistics sector.
The third issue is the infrastructure limitations that Indian logistics companies must deal with.
Due to high transportation costs caused by inadequate infrastructure, Indian products are not competitive on the international market. Additionally, inadequate infrastructure limits the ability of logistics companies to grow and penetrate new markets.
India’s regulatory setting represents the fourth difficulty.
The regulatory setting for logistics businesses is intricate and frequently inconsistent. Because of this, it is challenging for logistics companies to follow all the rules and yet be profitable.
Security issues are the fifth difficulty that logistics companies in India encounter.
Numerous Indian businesses are hesitant to export their goods through Indian ports and airports as a result of the recent terrorist strikes in Delhi and Mumbai. As a result, a lot of Indian businesses are shipping goods through ports and airports in other nations, which raises the cost of transportation.
What are the objectives of the National Logistics Policy?
- Make logistics a key component of the nation’s economic and development strategies.
- Establish a nationwide logistics portal to provide details about officials, infrastructure, and services in the logistics sector.
- Promote private sector involvement in the construction of logistics infrastructure.
- Boost communication among different ministries, departments, and other logistics stakeholders
- Encourage technology adoption in the logistics industry
- Promote the establishment of Logistics Parks and Hubs
How will India’s National Logistic Policy be a game changer for the economy?
- Better infrastructure
The National Logistics Policy will primarily have an impact on the nation’s infrastructure.
The infrastructure in India is a major obstacle for logistics, according to the government. As a result, the policy has suggested a number of actions to boost infrastructure, such as:
- Creating a National Logistics Portal to serve as a one-stop resource for data on logistics services
- Improving last-mile connectivity through programmes like the construction of hubs for multi-modal transportation and inland waterways.
- Creating a dedicated freight route connecting Delhi and Mumbai
- Increasing capacity at important ports through programmes like the construction of captive jetties
All of these actions are anticipated to increase the effectiveness of logistics operations in India and save expenses for companies.
Better connectivity
On September 21, 2022, the government launched the National Logistics Policy (NLP), which aims to lower logistics expenses as a proportion of GDP from their present level of 14% to less than 10%. By enhancing connection, lowering transaction costs, and optimising infrastructure, the strategy seeks to achieve this.
Increasing connectedness within India and with its neighbours is one of the NLP’s main tenets.
A network of expressways is being built, new rail lines are being built, existing rail lines are being updated, and inland waterways are being developed and improved. In addition to cutting down on expenditures and travel time, this will help relieve traffic congestion.
- New and improved inland canals are being constructed.
- There are new train lines being built.
- Upgrades are being made to existing rail routes.
- The construction of an expressway system
- Increased effectiveness
Enhancing the effectiveness of India’s logistics industry is one of the National Logistics Policy’s top priorities. This will be accomplished via a variety of strategies, including the creation of a National Logistics Database and a National Logistics Portal.
Information on India’s infrastructure and logistics services will be accessible through a single window thanks to the National Logistics Portal. Businesses will find it simpler to compare rates and the finest logistical service providers as a result.
The National Logistics Database would offer comprehensive details on India’s transportation network, including its ports, airports, railroads, and highways.
In order to plan their logistics operations effectively, businesses will be able to spot transportation system bottlenecks thanks to this.
Businesses should save a lot of money because of the logistics sector’s increased efficiency in India. As a result, it is anticipated that the economy would grow and more employment will be created.
Conclusion: Will India’s National Logistics Policy be a game changer for the economy?
Will India’s National Logistic Policy be a game changer for the Indian economy?
The macro policy concept makes it possible to address the nation’s logistics industry in a completely new way. With the Gati Shakti Program, the Sagarmala and Bharatmala (roadways and waterways) initiatives, the Dedicated Freight Corridors, etc., NLP has the potential to transform the game.
The policy’s implementation is expected to reduce the world’s excessive reliance on roads from 25% to 60%, causing a modal shift in logistics.
India relies on the railways only 30% of the time, vs. 60% globally. Waterways make up only 5% of the total modal share.
Trade is a key factor in the nation’s economic growth, thus effective infrastructure is essential. India is unable to sustain the exponential development necessary in the upcoming years with its current infrastructure and policies.
A strong infrastructure will lower costs and increase exports, which will ultimately aid in the economic growth of the nation. Within the next several years, India’s economy will surpass those of other developed nations.
Just like UPI revolutionized the payment industry of India, this policy is expected to revolutionize the entire logistics on India including road, rail, waterways and even air logistics and more importantly in this extremely competitive market it is expected to evolve India into a fierce computer not just in Asia but all across the world.
