Image Courtesy: Moneycontrol.com

India has a growing logistics sector representing 5% of India’s Gross Domestic Product and employing 2.2 crore people. India has the second largest road network in the world through which 68% of the freight movement happens along with a well-functioning rail and coastal logistics network. India has been able to improve its logistics performance from 54th position in 2014 to 44th position by 2018 in the World Bank Logistics Performance Index and aspires to move to the first 25 positions in the coming years.

The National Logistics Policy, unveiled on September 17th, 2022 was drafted with the aim to integrating the development in the logistics sector to increase the efficiency of the freight modes, through the development of Multimodal Logistics Parks and setting up of logistics data and analytics centres. The policy follows a multifaceted approach to decrease the transportation cost, increase efficiency to promote domestic and foreign trade and take the necessary steps to increase the competitiveness of Indian goods. The policy will set up a knowledge and information sharing platform as the point of reference as well as an e-marketplace for a seamless transfer of logistics. Currently, the cost of transportation is 13 to 14% of the GDP and the policy aspires to bring it down to 10% mark. 

India’s logistics sector has been weakened by insufficient transport network to reach the goal of last mile delivery, lack of proper warehousing facilities and lack of co-ordination between different fragments of the freight sector. The logistics sector is dealt with by more than 20 government agencies and 40 Partner Government Agencies and often there is very little policy coordination between the different departments. The lack of industry readiness and poor logistics infrastructure has spiked transportation costs in India. 

As a comprehensive multifaceted framework to solve the issues of the freight sector, the policy can be seen as a right step in the right direction to a well-integrated and efficient freight system. The policy demands a restructuring of the procedures across the various departments and services and integrating of cutting-edge technology and increased digitization. Along with the improvement in the existing road, rail networks and modern cargo facilities, it gives emphasis to the development of the warehouse sector to promote cross-regional trade and boost the effectiveness of agri-logistics in bringing down the wastage of agricultural products to less than 5%. 

The intent of the logistics policy is very much aligned with the aspirations to become a leading global manufacturing hub. But there are many components and stakeholders in the logistics and supply chain management ecosystem that require their proactive involvement and initiatives to make the framework robust and market-friendly. A digital platform is a good starting point to recognise and align the various departments and the rule book provisions. At the same time, the challenges are from within multiple quarters, especially the states that play an essential role in shaping policy implementation. The degree of digitisation and approach to digitisation vary from state to state in India. The state governments have a mixed record on this front. How much the bureaucracy recognises the need for a quick transportation in cargo movement is something that needs to be worked out on the ground and cannot be entirely resolved on a digital platform alone. One example could be that of RTOs;  are they ready to facilitate the movements of cargo vehicles without their routine check-ups on the roadside?

ULIP is projected to be the UPI moment in logistics. But can the private sector companies develop their interface based on the ULIP is the question in the long run? The role and the involvement of the market players could be channelised into the augmentation of the logistics ecosystem of the country by helping them with the easy-to-navigate state-level plugins on the ULIP. But it requires tremendous efforts to reform various policies interlinked to the logistics movements at the state level. Though multimodal hubs are proposed, identifying suitable locations, building the industrial neighbourhood, and supporting them with warehouses and connectivity are essential steps. Market reforms such as farm laws, warehousing policy etc are key lessons to be remembered in this context. As the world is moving towards green logistics, India’s step to increase the interoperability and standardisation process to bring the entire logistics under one umbrella is a much-needed reform to catch up with the rest of the world in terms of our logistics performance. At the same time, there are many policy reforms and land-based infrastructures that need to be addressed at a priority level to ensure the maximum efficiency envisaged on the digital platform as per the national logistics policy inaugurated.


This was first published in ‘MoneyControl.com.’ Read it here.

Views expressed by the authors are personal and need not reflect or represent the views of the Centre for Public Policy Research.

Chairman at Centre for Public Policy Research | + posts

Dr Dhanuraj is the Chairman of CPPR. His core areas of expertise are in international relations, urbanisation, urban transport & infrastructure, education, health, livelihood, law, and election analysis. He can be contacted by email at [email protected] or on Twitter @dhanuraj.

Associate, Research at CPPR | + posts

Anisree Suresh is Associate, Research and Client Management, at the Centre for Public Policy Research (CPPR). She completed her M.A in International Studies from the School of International and Area Studies, Goa University. She has done a couple of research internships at reputed research institutions of IR. Her master’s dissertation was on BIMSTEC and Indo-Pacific and published a research paper on the same. Her research interests pertain to security studies, South Asia, Indo-Pacific, IR theory and gender.

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