National Logistics Policy: Leaping India into the Future

The World is going through a series of turbulent times. Many countries are one war away from going bankrupt. At this time, it becomes crucial that countries strive to build robust economic frameworks and policies to counter-balance global unpredictability. 

Illustration by The Geostrata

One such high-priority area of concern is building strong logistics and supply chain mechanisms. Having a well-updated and functioning logistics sector is a non-negotiable for the persistent economic growth of any country. Let’s take a look at how India is embracing challenges and pursuing innovative strategies to develop a resilient economy.

There is a general misconception that India is food-scarce, the demand is far more than the supply can meet. Well, the truth is that India produces 1.5 times the food required to feed its people.

So where’s the problem? It lies in how the produce is stored and transported to the consumer. India loses around half of its food produced before reaching its consumers amounting to a loss of Rs 89,000 Crore or almost 1% of India’s total GDP every year. 

This case demonstrates a much larger problem of “India being too expensive to make products in.” Even when China is so unfavourable to do business with politically, companies like Apple are still hesitant to move their core operations to India as China is highly efficient economically.

The country has a robust framework of entities that work in synergy to reduce the cost of production. Even with many MNCs following the ‘China Plus One policy’, India fails to absorb much of the business relocation, often losing to competitive markets like Vietnam, Mexico and Thailand. 

PROBLEMS

Let’s look at some Quantitative and Qualitative factors concerning logistics in India to understand where the problem lies: 

One of the metrics used to describe how efficient a country’s supply chains are is the  ‘Logistics Cost as a share of GDP.’ This is at 8% in the USA, 10% in Europe, 11-12% in BRICS Nations and 14% in India.

India’s ranking in the World Bank's 'Logistics Performance Index Report’ jumped from 44th position in 2022 to 38th in 2023. This translates into a product costing more to manufacture and transport in India compared to the top 25 performing countries in the Index.

India currently has the second-largest road network in the world only trailing behind the USA, yet the cost of goods transportation is still high. This is due to the inherent fact that shipment through roads in India per metric ton kilometre is costlier than other modes of logistics such as water, pipeline and railways.

The share of road transport of goods against the total logistics is much higher in India compared to the top 25 performing countries. In short, India has struggled to diversify modes of logistics historically, resulting in overdependence on roads.

Such high dependence can also be attributed to the fact that it is easier for private players to run their own logistics services by road as other modes are nationally controlled. This leads to not only the overuse of roads but also a highly unorganised logistics sector. 

There are many pieces involved in a supply chain, including production, transportation and warehousing. In India, there are 20 government agencies, 40 govt partner agencies, 36 logistics services, 129 container depots, 168 container freight stations, and other intermediaries.

With time-consuming and cumbersome paperwork, these agencies rarely coordinate operations, often unaware of current scenarios and working on assumptions. This causes major delays, wastage and underproductivity of the whole network.

Other major concerns include the quality of the existing infrastructure and the staff, most of the warehouses do not have access to basic amenities like cold storage, internet, and electricity. The workforce is mostly uneducated and uninformed in Standard Operating Procedures resulting in a complete lack of communication.

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The products inside these places are mismanaged and not accounted for, leading to huge losses and wastage before even being delivered to the consumer. Also, the fact that National & International suppliers can’t actively track the status of their products at any warehouse, often located in rural areas, has led them to be hesitant to use such places in the first place.    

This as a whole caused India to historically rely heavily on the ‘Point-to-Point’ logistics model. Here, to bypass intermediaries, the suppliers transport goods straight to the destination with little to no stops in between. This majorly leads to trucks often running empty once the goods have been delivered, causing losses for the driver and the businesses. 

The other reason for high road dependence is that the railway network is not adequate.  The passenger and freight trains run on the same tracks. Freight trains are often stopped for hours giving preference to passenger trains. The average speed of these freight trains is only around 25 kmph compared to the global average of 90 kmph.       

SOLUTIONS

This is where the ‘National Logistics Policy’ comes into play. Through this policy, the Indian government aims to:

1. Reduce the logistics cost from 16% of Gross Domestic Product (GDP) to a global average of 8% by 2030.

2. Improve the Logistics Performance Index ranking, to be among the top 25 countries by 2030.

3. Create a data-driven decision mechanism across all nodes of the logistics ecosystem.

The NLP discusses 6 key objectives to successfully obtain the goal mentioned above:

Integration: Promoting ‘multi-modality’ through seamless integration of transportation, key infrastructure, digital system, policies and legislative requirements.

Optimisation: Ensuring optimal usage of logistics infrastructure and assets reducing downtime and costs.

Standardisation: To use international standards of assets, processes, taxonomy and benchmarking of quality standards.

Modernisation: Upgrading current infrastructure at a rapid pace, actively utilizing next-generation IT frameworks, drones and automation, green logistics and international best practices with a special aim to seamlessly integrate with the global value chain.

Formalisation: Promote mainstream logistics in higher education, continuous upskilling and re-skilling of existing workforce and ease formal addition of service providers to reduce fragmentation in the sector. 

Democratisation: To achieve transparency of data at all levels, promote inclusivity by addressing the needs of all key stakeholders, and encourage public-private participation.

KEY INITIATIVES

Let’s take a look at what steps have been planned out to achieve these 6 objectives.

To enhance multi-modality, the government has implemented several large-scale initiatives such as PM GatiShakti NMP, Bharatmala Pariyojana, Sagarmala Pariyojana and many more.

Most of these initiatives have overlapping, highly planned and coordinated projects. The GatiShakti initiative focuses on actualising all the objectives of NLP from building physical assets to developing new processes.

The Bharatmala initiative is a game-changer in expanding national highway networks, developing more than 44 expressways and improving last-mile connectivity.

The building of roads following the ‘Hub and Spoke Model’ is being undertaken, this is far more efficient, where high cargo frequency cities and towns are converted into hubs that are spread all across the country.

The trucks transport goods from the smaller cities aka ‘spokes’ only need to transport them to the nearest hub, from where another mode such as railways transports the goods to the next hub. In return, the truck carries goods from the hub back to the spoke.

This short-distance, fully loaded and high-frequency delivery model benefits truckers with low downtime and businesses with timely delivery, proper handling and avoiding a single point of failure. This demonstrates a highly multi-modal approach to logistics with every mode playing to its strengths and ensures achievement of maximum value.  

The Sagarmala initiative includes the development of inland waterways and, the development of new ports and upgrading existing to double the cargo handling capacity and reduce port turn-around time.

The development of world-class deep water ports in Vizhinjam and Vadhavan is going to revolutionize global supply chains and place India as a centrepiece in International Maritime Trade.

The Indian Railways has taken up the mammoth task of building 2 new dedicated freight corridors and further in planning, complete track upgrade to international standards, complete track electrification, and development of railway stations and depots at key places such as mines and ports for seamless connectivity. Utilizing next-gen communication and signalling systems, the Railways plans on increasing its share to almost 50% of total logistics in India.   

A Comprehensive Logistics Action Plan or CLAP is developed under the NLP to tackle all problems in a phase-wise manner, setting clear targets and roadmaps. The Logistics Performance Index or LPI is being used to assess gaps and strive to improve the performance of all parties at every phase.

A revolutionary Unified Logistics Interface Program or ULIP and ‘Dashboard for Ease of Logistics Services’ or E-LogS have been launched to integrate all relevant physical and digital infrastructure in one place using advanced blockchain tech. It includes developing logistics parks, high-capacity automated warehouses and AI-ML-based inventory tracking and asset management platforms.

Every product, process, entity, stakeholder and paperwork can be seamlessly tracked, monitored and actively managed across all geographies by every stakeholder. The ULIP has already started aiding in synergizing railway and roadway layouts to connect key ports, warehouses, expressways, and cities.

PROGRESS

Let's look at some of the results achieved so far: 

The total national highway length has increased by 60% in the last 10 years. The railways has built around 3,260 kilometres of dedicated freight corridors with trains running at an average speed of up to 60 KMPH and achieved 90% track electrification. Around 13 ports have been redeveloped with a reduction of turn-around time from 48 hours to 22 hours. 

The logistics cost has dropped to 8.9% in FY22. The ULIP has integrated 33 digital systems across ministries, 55 applications have been made live by the private sector and over 590 industry players have registered under the ULIP.

The identification, upgradation and connectivity of current and prospective warehouses equipped with automated inventory tracking systems, advanced cold-storage facilities, building new Logistics Parks, FSSAI-certified grain silos and many more are being taken up under the CLAP.

INTERNATIONAL PERCEPTION

Such progress has increased interest in foreign partners to do business with India. The signs are visible from the increased import-export of India and positive GDP growth predictions, with the International Monetary Fund referring to India as a ‘Bright Spot’ during the global growth slowdown and de-globalisation. 

India strives to enhance the lives of a billion people and to fulfil that goal, the country has to take up such large-scale initiatives to develop a robust, resilient and highly competitive economy. This will also act as leverage and enhance India’s ability to mediate global affairs and solve its strategic challenges. If India can keep up this record pace and proactively implement more of such groundbreaking policies, India can leapfrog into the future, ensuring equitable growth and cementing a multipolar world.

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BY ADITYA GOLLAKOTA

TEAM GEOSTRATA

info@thegeostrata.com