In 2020, Finance Minister Nirmala Sitharaman made an ambitious announcement in the annual budget speech – to reduce the logistics cost from 14% of GDP to less than 10% of GDP by 2022. Even the developed nations do not have such higher logistics costs. India’s logistics sector consists of more than 20 government agencies, 40 partner agencies, 37 export promotion councils, 500 certifications, 10,000 commodities and a 160 billion market size. It also involves a 12 million employment base, 200 shipping agencies, 36 logistics services, 129 Inland Container Depots, 168 Container Freight Stations, 50 IT ecosystems, and banking and insurance agencies. The logistics sector was highly defragmented and therefore, the budget announcement aimed at integrating the same to reduce the overall costs. Firstly, the ‘PM Gati Shakti National Master Plan’ was launched in 2021 to multimodal connectivity infrastructure to all economic zones. Projects like Bharatmala, Sagarmala, inland waterways, UDAN, etc. are sub-projects under the same master plan. Later, the ‘National Logistics Policy’ was launched in 2022 to provide the digital services and regulatory framework for the same. This new policy is being touted to revolutionize the transportation sector in India, similar to what UPI achieved in banking and digital payments. While Gati Shakti focuses on the development of infrastructure, the National Logistics Policy aims to provide the framework for the logistics ecosystem in India.
Why is National Logistics Policy important?
The economic state of a country is directly correlated to infrastructural development. Last year, the Government announced a 100 lakh crore national infrastructure plan. India is aiming at a 5 trillion economy, and therefore, infrastructure is going to be key. China has been known as ‘the world’s factory’ for a while now. In 2019, China’s exports itself were USD 2.5 trillion, almost equal to India’s GDP. However, after the Covid pandemic, India has become the spotlight. That’s when the Government launched the ‘Make in India’ campaign – whereby it invited manufacturing in India to lure investors to divert their activities to India, instead of China. It is for the same reason that the Government initiated the technology-based master plan — National Logistics Policy (NLP). The policy will revamp, digitize and revolutionize logistics. Logistics is key to facilitating trading activities and it not only involves transportation services but also storage and warehousing, and government permissions like licensing and customs. The more seamlessly the goods move across the country, the more the trading activity will increase. The government has large plans for building logistics parks to provide warehousing facilities and multi-modal connectivity. Therefore, NLP is focusing on collaboration and data-driven decision-making, while the national infrastructure is being developed. The National Logistics Policy (NLP) also mentions Ease of Logistics (E-Log) to help exporters and manufacturers resolve operational issues by directly reaching out to the government.
What is ULIP under NLP?
Today the movement of goods is multi-modal involving a combination of road, rail, air or water networks. However, bureaucracy and red-taping result in the delayed shipment of goods. There are around 20 government agencies, and 40 government partner agencies looking over the logistics sector. So we can imagine how difficult it would be to bring coordination between these groups. Therefore, for logistics infrastructure to develop, these agencies must be organised under one umbrella with a common interface. That’s what the Unified Logistics Interface Platform (ULIP) aims to achieve under the National Logistics Policy (NLP), just like UPI did in digital payments. ULIP aims to bring all services about logistics under one single digital portal to free the manufacturers and exporters from all the tedious processes. ULIP aims to enable submission at one single portal to get all related work done. Thus, the portal would also be able to collect data and provide real-time statistics as well, currently a part of which is achieved through GST e-way bills. The real-time data can also be used to know the exact state of the consignment and to identify freight vehicles going back empty or less than full capacity.
The way ahead
Indian logistics is heavily dependent on the railways. However, the rail sector itself suffers from structural deficiencies which need to be eliminated, if the logistics cost is to be halved as per global benchmarks. The average speed of a freight train in India is merely 25 kmph for decades and this certainly needs to be doubled, at the least. Railways must aggregate the goods at the source, and disaggregate at the destination, to capture the small-load but high-value business. India also needs to work on eco-friendly and cost-effective inland waterways freight movement, learning from its Chinese counterpart who puts key emphasis on port infrastructure. For road logistics, there is a desperate need to organise small operators with government-supported aggregation apps. Air logistics too needs improvement for the transportation of high-value and perishable items. The increased focus on the national infrastructure with logistics as the key priority is certainly a step in the right direction. The formation of the National Logistics Policy certainly explains the government’s understanding of the key issues involved, however, India needs large-scale infrastructure development and that too, at a brisk pace, to make the most of the global economic situation.