In the World Bank’s 2018 Logistics Performance Index, which ranks 160 nations, India came in at number 44. With rankings of 26 and 39, respectively, China and Vietnam beat India.
India’s logistics industry performed poorly on the sub-indices for the infrastructure and the customs efficiency of the clearing process, simplicity, etc. Lack of infrastructure raises the cost of logistics. According to one estimate, India’s logistics expenditures represent 13–14% of GDP, which is a comparatively higher amount.
For developed economies, the comparable number is between 8% and 10%. India’s industry is therefore uncompetitive. The logistics industry also faces other difficulties. The National Logistics Policy was recently published by the government in this regard. The new framework has given particular attention to streamlining procedures for seamless cooperation and a decrease in total logistics.
What made a logistics policy necessary?
Transportation services for moving goods, storage facilities that are especially important for trade in perishable goods like food, fruits, and vegetables, as well as the efficient operation of government services that assist commerce, like licensing and customs, are all included in logistics.
In October 2021, when the PM Gati Shakti-National Master Plan for multi-modal connectivity was introduced, Prime Minister Modi stated that the logistical costs in India accounted for almost 13% of GDP. In industrialised nations, this condition does not exist. India’s exports are significantly less competitive due to high logistics costs.
Gujarat, Punjab, and Haryana were rated as the top three states for logistics ease in a Ministry of Commerce and Industry assessment last year titled “Logistics Ease Across Different States.” The factors taken into consideration were the standard of the road and rail networks, the cost of shipping goods by road, the standard of the warehousing facilities, etc.
What qualities does the National Logistics Policy have?
The Unified Logistics Interface Platform (ULIP), Ease of Logistics (ELOG), System Improvement Group, and Integration of Digital System (IDS) are the four components of the new logistics policy (SIG). The IDS integrates 30 distinct systems from seven agencies, including information from the departments of road transportation, railroads, customs, aviation, and commerce.
According to the prime minister, unified logistics interface platforms, or ULIPs, would “bring all the digital services pertaining to the transportation sector into a single interface.” In a similar vein a new digital platform called Ease of Logistics Services (E-Logs) has been launched to let business associations communicate with the government to resolve problems.
What methods does the government employ to enhance logistics?
The prime minister had already announced the FASTag for electronic toll tax collection and faceless assessment for customs, both of which were meant to improve logistics-related factors. The PM claims that the Gati Shakti master plan has “a vast quantity of material relating to diverse infrastructure” and is the most detailed of these plans.
In his Independence Day speech from the previous year, the prime minister said: “In the coming days, we will launch PM Gati Shakti Plan, a 100 lakh crore national infrastructure master plan which would establish a foundation for holistic infrastructure and give an integrated pathway to our economy.”
A single portal was established for ministries to track the development of multiple infrastructure projects. In a later statement, the PM stated that the Centre aimed to nearly double the current natural gas pipeline network of 19,000 km by building over 200 new airports, helipads, and water aerodromes where planes can land over the course of the next 4 to 5 years.
Benefits of National logistics policy:
1. The logistics cost as a percentage of GDP in India is 13%, as compared to the global average of 7%.
2. In order to become the manufacturing hub of the world, it is important to focus on reducing the logistics costs in India.
3. The policy will concentrate on digital governance and the compliance burden.
4. This will include a single point of reference for all logistics and an integrated digital logistics system. This will help in reducing the time and cost of doing business in India.
5. 35 Multi-model logistic parks (MMLP) projects to be developed under Public Private Partnership (PPP) Across The country.
Reasons for inefficient logistics in India:
1. Insufficient infrastructure.
2. The industry is still mostly unorganised.
3. India also has a skewed mix of modes of transportation, with roads carrying 60% more freight than in many other important industrialised nations.
Undoubtedly, the new National Logistics Policy is a step in the right direction. To improve logistical performance, though, more work must be done in the long run. A favourable effect will surely result from the government’s commitment to sector development that includes policy improvements, infrastructure expansion, tax reforms, and technology adoption.
It will increase India’s ability to compete internationally, generate employment, raise its standing in the world, and pave the way for it to develop into a logistics superpower. By 2025, these projects would assist India in becoming a New India.