Long queues of lorries and trucks loaded with cargo at the inter-state border gates of national highways is a familiar sight. It is not always because of the tolls that they have to pay to continue with their journey. A large part of this is also because of documentation, and cumbersome procedural bottlenecks.
In India getting goods to move from the source point to the destination has always been a seriously costly affair. While, there is no official estimation of logistics cost for India, some estimates have pegged logistics cost to be 13 to 14 percent of the country’s gross domestic product (GDP). This compares unfavourably with European countries where the logistics costs stand at about 8-9 percent of the GDP.
From jurisdictional issues to non-standardised paperwork, to ambiguous state levies to byzantine procedures, to a multitude of IT-backbones, a barrage of hurdles have added on India’s logistics costs that have come in the way of turning India into an efficient, single market.
These costs have had three major implications. One, it adds to inflation. Greater costs of transporting goods creep their way into the final prices of goods, knocking up inflation along the way.
Two, it makes India’s merchandise export less competitive in the global markets. Moving goods to the ports and then to the high seas is, relatively, costlier for Indian traders compared to their global peers. This is holding back India’s exports realising its true potential in the world trade market.
Three, high cost inefficiencies in intra-modal logistics have remained as a hurdle for attracting large scale investment, and turning India into a manufacturing powerhouse. China’s manufacturing capabilities have long overshadowed India, and the Government of India's push for manufacturing comes at a time when many big companies are seeking an alternative to the Asian giant as costs and risks there rise.
There are 20 government agencies, 40 Partner Government Agencies (PGA), 37 export promotion councils, 500 certifications, about 200 shipping agencies, 36 logistics services, 129 Inland Container Depots (ICD), 166 Container Freight Stations (CFS), 50 IT ecosystems, banks, and insurance agencies all involved in making things move in India.
The National Council for Applied Economic Research (NCAER), a policy think-tank, in a 2019 research paper estimated that logistics accounted for 21.6 percent as percentage of gross value added (GVA) for agriculture, 11.16 percent for mining, 12.29 percent for food and beverages, 7.91 percent for textiles, 15.41 percent for ferrous and non-ferrous metals, 17.98 percent for machinery and equipment, and 12.97 percent for cement.
Transportation accounts for the bulk of India’s logistics costs (about 53 percent), followed by warehousing (12 percent), and material handling (10 percent).
The glaring cost inefficiencies are, however, seen in those components that have great potential for automation, and the technological interfaces. A September 2019 study of the NCAER shows that customs clearance (5 percent), documentation (4 percent), logistics systems management (2 percent), administration cost (2 percent), insurance cost (2 percent), software and maintenance (1.3 percent), cost of logistics equipment (1.7 percent), marketing cost (0.8 percent) and IT hardware and software cost (1 percent) account for nearly 20 percent of the total logistical cost.
“There is a serious problem of harassment faced by truck drivers from the RTOs (regional transport offices) and police officials on every route, with the NCR-Mumbai route recording comparatively the least harassment, and the Ludhiana-Bengaluru and NCR-Guwahati routes registering the worst problems,” the study said.
“By and large, we find that the logistics costs fall across all routes, including both domestic and EXIM routes when the operation is undertaken by integrated service providers. This makes it imperative to create an incentive framework for bringing all stand-alone operators under the ambit of integrated service providers in the logistics sector,” it said.
The National Logistics Policy (NLP) seeks to precisely address these. The policy is founded on four major pillars: IDS (Integration of Digital System); ULIP (Unified Logistics Interface Platform); ELOG (Ease of Logistics); and SIG (System Improvement Group).
Under the IDS, 30 systems of seven departments will be integrated. These departments will include those belonging to ministries of road transport, railways, customs, aviation, foreign trade, and commerce. All these departments have their own digital data which will be integrated under the IDS. This will help smooth cargo movement.
Under the ULIP, all available transport modes will be visible, while under ELOG, rules will be simplified and logistics business will be eased. The SIG will monitor all logistics projects regularly through a group of officers from ministries concerned.
The pivot point of the policy will be the seamless interoperability, through an overarching interdisciplinary, cross-sectoral and multi-jurisdictional architecture for the entire logistics ecosystem. In promise, the NLP can do to India’s logistics universe what UPI has done to India’s payments ecosystem.
Read More at www.moneycontrol.com/news/opinion/national-logistics-policy-nlp-can-do-to-indias-logistics-what-upi-has-done-to-payments-9192561.html/amp?