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Editorial Articles


Issue no 29, 15-21 October 2022

National Logistics Policy 2022

 A Push for Achieving Global Standards

 

Atul K Thakur

Modernising the logistics sector is not an optional action plan, more so for a country like India which has a large stake in international trade and with a propensity to grow further in the world order. The World Bank Logistics Performance Index (2018) ranked India 44th in terms of the ease and efficiency with which products can be moved into and inside the country. The Index is a weighted average of the country's scores on six key dimensions: customs performance, infrastructure quality, ease of arranging shipments, logistics services quality, consignments tracking and tracing and timeliness of shipments. The ranking did not concur with the country's standing of prominence in the global economy and its ambitions. Therefore, the need for a comprehensive logistics policy was felt in order to meet global standards as reduced logistics cost improves efficiency, cutting across various sectors of the economy, encouraging value addition and enterprise. There are numerous reasons that can be attributed to the various hiccups faced by India's logistics sector. The major ones being (i) India's logistics sector is largely unorganised and fragmented (ii) the sector has been running without a cost advantage (iii) the regulatory framework is complex and governed by numerous stakeholders. There are more than 20 government agencies, 40 PGAs (Partner Government Agencies), 37 export promotion councils, 500 certifications, 10000 commodities. It also involves a huge employment base, 200 shipping agencies, 36 logistics services, 129 Inland Container Depots (ICDs), 168 Container Freight Stations (CFSs), 50 IT (Information Technology) ecosystems and banks & insurance agencies. Further, 81 authorities and 500 certificates are required for Export-Import (EXIM). In numbers, it is hard to ascertain the exact cost percentage on logistics in India while there is conformity that it is well above the average of developed countries. The policy seeks to reduce the logistics cost from 14 percent of Gross Domestic Product (GDP) to a global average of 8 per cent by 2030. Investment Information and Credit Rating Agency of India Limited (ICRA) estimates that the sector will develop at a Compound Annual Growth Rate (CAGR) of 10.5 per cent through 2025 after growing at a CAGR of 7.8 per cent over the past five years. At the heart of the policy is a push for laying down an interdisciplinary, crosssectoral and multi-jurisdictional framework for positioning logistics at par with developed countries by rationalising the terms and action.

NLP: Implementation Roadmap: It is estimated that the worth of the Indian logistics market will be around USD 215 billion in next two years compared to about USD 160 billion at present. The National Logistics Policy 2022 has eight action areas that will be implemented through the Comprehensive Logistics Action Plan (CLAP): (i) Integrated Digital Logistics Systems (ii) Standardisation of physical assets and benchmarking service quality standards (iii) Logistics Human Resources Development and Capacity Building (iv) State Engagement (v) EXIM (Export-Import) Logistics (vi) Service Improvement framework (vii) Sectoral Plan for Efficient Logistics (viii) Facilitation of Development of Logistics Parks.

Four key actions for immediate implementation are:

  • Digital integration: There will be digital integration of different systems of seven various departments (like road transport, railways, aviation, commerce ministries and foreign trade).
  • Unified Logistics Interface Platform (ULIP): This has been prepared as an integrated portal in which information about the location of goods can be obtained on a real-time basis with considerable ease. This National Industrial Corridor Development Corporation (NICDC) Logistics Data Bank Project has been leveraged.
  • Ease of Logistics (ELOG): This will enable transparency and accessibility.
  • System Improvement Group (SIG): This will monitor all logistics-related projects regularly.
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It is vital to note that there is a low rate of technological adoption across different stakeholders. Usually the logistics cost is increased by the high indirect expenses brought on by erratic supply chains and subpar first and last-mile connectivity. The above-mentioned policy interventions are to ensure that logistical problems are minimized, exports increase significantly, and small businesses and the workforce involved gain substantial profit. Also, it would be important to create a single window elogistics market and focus on the generation of employment and skills, and make Micro, Small and Medium Enterprises (MSMEs) nationally and globally competitive. For capacity-building and making the logistics sector process-driven in India, an integrated digital system will help in a big way for facilitating a unified regulatory environment and policy across the country. A unified policy environment will be helpful if seamless integration is ensured in implementation phases.

How NLP Enhances India's Economic Outlook : Cutting down the response time, cost, waste and exponentially improving the coordination and efficiency for a robust last-mile connectivity should lead the National Logistics Policy to exactly make the impact where it is required most in a value chain. At the time when India is in a race of offering the world its manufacturing capability and thus housing the production facilities of major multinational companies (in addition to what all exists), it is sacrosanct to strategise competitiveness and processes. Attracting new investments in the postpandemic times will depend a lot on how the transformed processes and competitiveness are giving India an edge above its competitors. The positive momentum shall ensure greater demand of Indian products (besides services where India already leads) in the global market. A scenario like this will enthuse the possibilities at macro level with quality employment and economic growth.

How NLP Complements India's International Trade Targets: It wouldn't be over-optimism in recognising the logistics sector as the most crucial determinant of India's international trade, essentially so for its key role in domestic and international movements of the products and thus giving a much needed traction to the value system and exports. Improving the logistics sector will facilitate a 10% decrease in indirect logistics cost leading to the growth of 5 to 8% in exports. The National Logistics Policy is made to promote seamless movement of goods and equipping the Indian industries to cope with the challenges that are upfront as India is aspiring for a greater integration with the world market for diversifying its products and leveraging the next phase of globalisation but without compromising on its resolve of 'selfreliance'. While it appears in dichotomy, the fact remains that India is open for the world and its enhanced industrial capacity is the next big thing to be explored through international business partnerships and collaboration. With the endowed natural and human resources and conducive business environment, the world's largest democracy (India) is offering a hope to the world for a closer economic interface.

How NLP Complements Previous Connectivity Projects: The National Logistics Policy's transformational capacities further increase when combined with previous connectivity and infrastructure improvement schemes like:

  • Gati Shakti: 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 entire logistics ecosystem. Gati Shakti plans to bring forth a monumental reform in connectivity and transportation infrastructure. To achieve this, sixteen Ministries, including Railways and Roads, are working together to create a unified and streamlined network of connectivity. The vision is to eliminate departmentalization and encourage seamless communication and institutionalize allinclusive project planning.
  • The Sagarmala Project that envisions using the potential of the coastline and waterways to reduce the amount of infrastructure needed to reach their targets.
  • Bharatmala Project that focuses on reducing critical infrastructure gaps to increase the effectiveness of road traffic circulation across the nation.
  • Udaan: The Centre's flagship regional air connectivity scheme has taken off impressively with the scheme now aiming to connect the earlier unconnected parts of India to not only domestic but also international destinations.
  • Complementing these connectivity and infrastructure schemes, the National Logistics Policy appears to be promising and the industry is keeping faith in it while awaiting its benefits with increased value addition and enterprise. 

How NLP Streamlines the Logistics Business: The logistics sector was granted Infrastructure status in 2017, making it easier for companies operating within these segments to raise longterm credit from banks and other financial institutions at lower rates. It also majorly helps in attracting foreign investments to the sector. The National Logistics Policy should give further impetus to the logistics sector with a unified policy and regulatory environment for endto-end logistics services and an overarching institutional framework that will govern the logistics sector and enhance its competitiveness.

Conclusion

Aligned with the vision of economic reforms, India's journey in the policy space since 1991 should be seen through the prisms of both change and continuity. A vision of developing world class infrastructure through integration of stakeholders in holistic planning shall be always helpful for ensuring efficiency and synergy in the execution of the project, as a steering force, it should be prioritised in the implementation phase as well.

(The author is a policy professional, columnist and writer with a special focus on South Asia. He can be reached at atulmthakur@gmail.com)

 Views expressed are personal.