Logistics Sector
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Content
- Logistic Performance in India
- Key Problems in India’s Logistic Sector
- What should be done to improve logistics performance in India
- Key steps in this direction
Introduction
- Logistics including transportation, inventory management, warehousing, material handling &
packaging, and integration of information, is related to management of flow of goods between the point of origin and the point of consumption. - India’s logistic sector currently is worth $160 billion dollars and government expects it to go to $360 billion by 2032. But it remains unorganized to a large extent.
Logistic Performance of India:
- As per the Logistics Performance Index, 2023 released by World Bank, India is ranked 38/139 countries in terms of the logistics performance.
- Logistics Cost in India have been in the range of 14-18% of the GDP against the global benchmark of 8%.
Key Problems in India’s Logistic Sector:
- The Regulatory Environment remains complex and fragmented due to multiple regulations governed by various stakeholders.
- For instance, there are 20 government agencies, 37 export promotion councils, 500 necessary certifications ; 200 shipping agencies; 36 logistic services etc.
- Heavy dependency on Road Transport and lack of seamless movement of goods across modes.
- Low level of technology adoption among various stakeholders: Lack of integrated IT infrastructure/ modern technology.
- Underdeveloped material handling infrastructure
- High Indirect Costs due to unpredictable supply chains and poor first and last mile connectivity add to the logistic cost.
What should be done to improve logistics performance in India:
- Ensuring Efficiency of Clearance Process (i.e.,speed, simplicity, and predictability of formalities) by border agencies, including customs.
- Improving the quality of trade and transport related infrastructure – (e.g., ports, railroads,
roads, IT etc.) - Easing of arranging competitively priced shipments
- Enhancing the competence and quality of logistics services (e.g., transport operators, custom brokers)
- Providing for Tracking and Tracing of Consignments.
- Ensuring timeliness of shipments in reaching destinations within the scheduled or expected delivery time.
- The above aspects would be possible if government focus on new technology, skilling and automation.
- These aspects have been captured by the LPI, 2023 of the World Bank.
Key steps taken in this direction include:
i. Infrastructure initiatives like Bharatmala, Sagarmala, Parvatmala, National Rail Plan, UDAN etc.
ii. Process reforms include – Introduction of GST, e-Sanchit, Single Window Interface for Trade
(SWIFT), Indian Customs Electronic Data Interchange Gateway (ICEGATE), Turant Customs and
others.
iii. National Logistic Policy, 2022 was launched to integrate all the above efforts by different government agencies and lay on overarching inter-disciplinary, cross sectoral, and multi-jurisdictional framework for the logistics sector.
- It provides a comprehensive agenda to develop the entire logistic ecosystem with two
major visions:
1. Reduce Logistic Cost in India by 5% of GDP over the next five years
2. Improve India’s ranking in the Logistic Performance Index - It also aims to enhance logistics sector competitiveness through a unified policy environment and an integrated institutional mechanism.
iv. Other initiatives improving the logistics sector include:
- PM Gatishakti was launched in 2021 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 project. The scheme envisages efficiency in services like processes, digital systems and regulatory framework.
- Plans of 35 Multimodal Logistic Parks: The Road Ministry plans to develop 35 multimodal logistic parks in India that would cater to 50% of the freight movement, enable a 10% reduction in transportation cost and a 12% reduction of CO2 emissions.
- Other Projects like Bharatmala, Sagarmala etc. ae also focused on improving India’s logistic sector.
- Diesel Deregulation have made logistic cost more predictable.
- Creation of a Logistic Division in the Department of Commerce
- Infrastructure Status to Logistics sector
- Logistic Efficiency Enhancement Program and Vehicle Fleet Enhancement Program
1. By Ministry of Road Transport and Highway
2. To improve India’s logistics efficiency
vi. Freight Smart Cities by Commerce Ministry’s Logistic Division.
- Under this, the Logistics Division under Ministry of Commerce and Industry has decided to work in a planned manner to improve the city freight movement.