- India’s logistics costs add up to around 13 per cent of gross domestic product which is significantly higher than developed countries like China, US and Europe, where the global average is somewhere around 8 percent. It shows that there’s lots of room for improvement.
- One of the major factors for high logistics costs is the excessive reliance, at present, on road transport for cargo movement.
- Logistics in India is highly fragmented. Organised players account for only 3.5 percent of the logistics market. However, they are expected to grow much faster at a compounded rate of more than 35 percent over the next few years.
- The high cost of logistics in India can lead to inflationary pressures for consumers.
- It can also make exports uncompetitive and dampen investor confidence in the economy, reducing domestic and foreign investment.
Government Initiatives to Improve Logistics Sector
- The Government has launched the “PM GatiShakti — National Master Plan” for infrastructure development aimed at boosting multimodal connectivity and driving down logistics costs.
- It 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.
- The portal will also allow various government departments to track, in real time and at one centralised place, the progress of various projects, especially those with multi-sectoral and multi-regional impact.
- The objective is to ensure that each and every department now has visibility of each other’s activities providing critical data while planning and execution of projects in a comprehensive manner.
- National Logistics Policy 2022
- The government has released the National Logistics Policy 2022 as a comprehensive effort to address issues of high cost and inefficiency by laying down an overarching interdisciplinary, cross-sectoral and multi-jurisdictional framework for the development of the entire logistics ecosystem.
- NLP targets to bring the logistics cost down to 8 per cent by 2030.
- The NLP expects this reduction through the implementation of a five-pronged strategy.
- Pushing up the share of railways from the current 28 per cent to 40 per cent.
- Setting up multi-modal logistics parks by encouraging private investment in hotspots identified on the GatiShakti platform.
- Giving special emphasis to inland water transportation, coastal shipping, and moving liquid bulk cargo via pipelines.
- Specific plans are to be drawn up for 15 industries that constitute the majority of bulk cargo movement.
- Digital integration is to be achieved for tracking and monitoring.
- Greenfield Expressways – Greenfield Expressways are designed to avoid inhabited areas and go through new alignments to bring development to new areas and to reduce land acquisition costs and construction timelines. Eg: Delhi-Mumbai Expressway.
- Dedicated Freight Corridors – It is a high speed and high capacity railway corridor that is exclusively meant for the transportation of goods and commodities.
- The Goods & Services Tax harmonised and unified tax rates across the country and removed ambiguous state levies.
- 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.
- All this is expected to put India amongst the top 25 nations in terms of logistics efficiency by 2030, which can then surely lead to the aspiration of being amongst the top 10 by 2047, when India turns 100.