- Connectivity plays an important role in decongesting cities. If India can improve its logistics, it would undoubtedly raise India’s global competitiveness.
High Logistics Costs
- India spends around 13% of GDP on logistics, while China spends less than 10%. The comparable figure for Europe is 8%.
- The single biggest factor making India’s logistics costly is the excessive reliance, at present, on road transport for cargo movement.
- Shifting a greater proportion of freight to railways, inland waterways and coastal shipping, in seamless intermodal shifting of the same cargo load, is seen as the best strategy to bring down costs, as transport by rail and water is significantly cheaper than transport by road.
Towards Intermodal Transport
- To achieve intermodal transport, some things need to change. One is creation of the appropriate modes of transport, such as barges and ports to navigate inland waterways, goods trains that run to a timetable, and trains that connect large towns with smaller towns in the neighbourhood.
- Another is coordination. For that, the primary requisite is collection and sharing of the relevant data. That means tagging every piece of freight with sensors that can communicate with machines that would relay real-time information to a central hub that can coordinate onward movement.
- Efficient coordination in logistics depends on ubiquitous telecom connectivity and the deployment of the capacity for machine-to-machine communication.
- It is also crucial that regulatory convergence is established to enable smooth handover of cargo from one mode to the next. In this, the central government’s PM GatiShakti programme should help.
- PM GatiShakti is a digital platform that connects 16 ministries — including Roads and Highways, Railways, Shipping, Petroleum and Gas, Power, Telecom, Shipping, and Aviation- with a view to ensuring holistic planning and execution of infrastructure projects. The portal will offer 200 layers of geospatial data, including on existing infrastructure such as roads, highways, railways, and toll plazas, as well as geographic information about forests, rivers and district boundaries to aid in planning and obtaining clearances.
- Inter-state cooperation to permit movement across state borders is another layer of challenge, one that has been eased but not overcome by the introduction of GST.
- With the notification of more liberal rules for the movement of drones and private jets, new modes of transport are becoming available and steadily more affordable.
- Changing the fuel used in all forms of transport, so as to reduce greenhouse gas emissions, is the key to both meet India’s climate goals and to improve air quality, besides lowering cost.
- There is also the challenge of manufacturing the vehicles, the batteries, and other ecosystem kits domestically, with world-beating competitiveness. Scheme such as the Production Linked Incentive (PLI) Scheme for Automobile and Auto Component Industry, FAME II (Faster Adoption and Manufacturing of Hybrid and EV) scheme, etc. show the government’s commitment in addressing the challenge.
- Underlying all these is the challenge of financing all such endeavours in new-generation logistics. Some venture and private funding has been forthcoming. More is needed.
- Banks and the bond market can fund only projects that have crossed the initial hurdles of high risk with the help of risk capital. India’s pension funds—the Employee Provident Fund and the National Pension System—and the Life Insurance Corporation must find the courage to devote a slice of their giant corpus to funding innovative entrepreneurship.