How Businesses Will Benefit from India’s National Logistics Policy
India's National Logistics Policy is expected to give a massive boost to the country's US£200 billion logistics sector. Through increased digitization, streamlining how different ministries operate, and cross-sector initiatives, the policy aims to reduce the cost of logistics and enhance efficiency. Industry stakeholders have welcomed the National Logistics Policy, which can place India among the top 25 logistics ecosystems in the world.
The policy will be implemented in conjunction with the PM GatiShakti National Master Plan to ensure efficiencies in India's massive infrastructure and connectivity development programs.
On September 21, 2022, India's Union Cabinet approved the National Logistics Policy, which lays down a comprehensive policy framework that is interdisciplinary, cross-sectoral, and multi-jurisdictional for the development of India's US£200 billion logistics sector. The policy provides for seamless integration of multiple modes of transportation by leveraging technology, processes, and skilled manpower, key to India's ambitions to become a US£5 trillion economy by 2025. The National Logistics Policy is intended to work in combination with the PM GatiShakti National Master Plan to develop an integrated infrastructure network in an efficient and cost-effective manner.
Logistics facilities include transport services for the movement of goods, storage facilities especially important for trade in perishable goods like food, fruits, and vegetables, and the smooth operation of government services that facilitate trade, such as licensing and customs.
Key targets of India's National Logistics Policy
The primary vision of the National Logistics Policy is to foster a technologically enabled, integrated, cost-efficient, resilient, sustainable, and reliable logistics ecosystem for accelerated and inclusive growth. It aims to improve the competitiveness of Indian goods in domestic and export markets by enabling smooth movement of goods across the country. The National Logistics Policy lists out the following three key targets:
- Reduce cost of logistics in India to be comparable with global benchmarks by 2030: India' logistics costs are currently at 13-14 percent of the GDP, which is much higher than the average of 8-10 percent cost incurred by most developed economies.
The high indirect costs due to unpredictable supply chains and poor first and last mile connectivity add to the logistics cost. Presently, the sector is also highly fragmented and unorganized.
- Improve the Logistics Performance Index ranking, aim to be among top 25 countries by 2030 - In 2018, India was ranked 44th in the World Bank Logistics Performance Index, a measure through which the Bank ranks countries based on their logistics performance.
- Create data driven decision support mechanism for an efficient logistics ecosystem: India has a complex regulatory environment, with multiple and overlapping regulations governed by various stakeholders. For example, there are over 20 government agencies; 37 export promotion councils; 500 certifications; 200 shipping agencies; 36 logistics services; and 129 inland container depots and 168 container freight stations.
Additionally, there is also a low level of technology adoption among various stakeholders.
What are the main deliverables of the National Logistics Policy?
The policy has four main deliverables to be achieved through the Comprehensive Logistics Action Plan (CLAP). They are:
- Integration of digital system (IDS): The IDS will cover 30 different systems belonging to seven departments, integrating data from the road transport, railways, customs, aviation, and commerce departments.
- Unified Logistics Interface Platform (ULIP): This platform will integrate all transportation-related digital services on a single website portal.
- Ease of logistics (e-log): E-log is a digital dashboard under development by the industry department for registering, coordinating, and monitoring time-bound issue resolution. It will include timelines and the status of the resolution.
Industry associations can contact the government directly regarding their concerns.
- System Improvement Group (SIG): This group has been created along with the Network Planning Group (NPG) to improve coordination across government ministries and between the state and central governments.
How will the National Logistics Policy be implemented?
The policy will be implemented through the CLAP plan, which proposes the following interventions:
- Integrating digital logistics systems: A unified logistics interface is sought by linking multiple data sources and designing cross-sector use cases for logistics stakeholders. Important initiatives launched to achieve this include the Unified Logistics Interface Platform (ULIP), the Ease of Logistics Services platform (e-logs), e-Handbook on Warehousing, and training courses on PM GatiShakti and logistics on the i-Got platform.
- Sectoral Plan for Efficient Logistics (SPEL): Under this framework, plans for each sector will be developed in alignment with the PM GatiShakti National Master Plan. SPEL will primarily focus on:
- Prioritizing inter-sectoral cooperation to complement and not duplicate efforts.
- Addressing logistics issues pertaining to infrastructure, processes, digital improvements, policies and regulatory reforms, and capacity building.
- Facilitating the development of logistics parks: The National Logistics Policy calls for development of logistics parks, including Multi Modal Logistics Parks, Air Freight Stations, Inland Container Depots, Container Freight Stations, Cargo Terminals, etc.
For the same, the CLAP framework provides that:
- Draft framework guidelines are to be set to facilitate development of logistics parks, with the aid of private investment.
- A network of logistics parks is to be created by mapping them on the PM GatiShakti plan for enhanced visibility, improved logistics efficiency, and connectivity.
- EXIM (export-import) logistics: The CLAP framework will identify infrastructure and procedural gaps in India's EXIM connectivity and create a streamlined and reliable logistics network, with transparent and efficient cross-border trade facilitation. This will not only improve India's trade competitiveness but also enable greater integration with regional and global value chains.
- Logistics manpower skill development and capacity building: The CLAP framework aims to develop an all-encompassing logistics human resource strategy, wherein, different line ministries will develop action plans to address skill development and internal capacity building challenges in the respective sectors.
- Service improvement framework: Improving regulatory interface to enable coordination between different sectors. The framework also aims to eliminate fragmentation in documentation, formats, processes, and liability regimes and reduce gaps in regulatory architecture.
- Standardization of physical assets and benchmarking service quality standards: By standardizing physical assets and setting a benchmark for service quality standards, the government intends to enhance interoperability, minimize handling risks, undertake process optimization, and improve ease of doing business.
In warehousing value chains, for example, standardization is essential for reducing costs and ensuring global compatibility and competitiveness.
- Engagement with different Indian states: The CLAP framework outlines provisions that will support development of state and city level logistics plans, set up institutional frameworks to act at city and state level, and measure and monitor action by states and rank them. For the purpose, two groups, the Network Planning Group (NPG) and the Service Improvement Group (SIG), will be set up to improve coordination across government ministries and between state and central governments. At present, all states and union territories (UTs) have been fully onboarded.
Fourteen states have already developed their respective State Logistics Policies on the lines of the National Logistics Policy and for 13 states, it is in the draft stage.
How have industry stakeholders responded?
Industry watchers and stakeholders appreciate the new logistics policy framework. It has been assessed that higher logistics spend has resulted in a competitiveness gap of US£180 billion for India and this difference could increase to US£500 billion by 2030. The new logistics policy is thus timely and will make Indian exports more globally competitive.
Industry representatives are also keen about the push for digital adoption. Kami Viswanathan from FedEx Express contends that 'technology is the key' to combine synergies of all involved stakeholders and manage complexities better, particularly as India is modernizing its infrastructure and engineering capacity building across its supply chains. For example, paperless EXIM trade operations through the e-sanchit portal, implementation of faceless evaluation in customs, effective use of e-way bills and FASTag, etc. have made operations faster and smoother in the Indian logistics industry.
Also, a unified tax system like the Goods and Services Tax (GST) enables ease in issues related to the logistics sector. With newer digital initiatives like ULIP, e-logs, etc., the logistics sector efficiency will be further bolstered. Speaking to the Economic Times, Arindam Guha from Deloitte India expects the new scheme can facilitate a modal shift in logistics -- from the current over-dependence on roads (over 60 percent share currently as against 25 percent globally) to railways (30 percent currently vis-a-vis around 60 percent global benchmark) and waterways that currently has only five percent share in the modal mix.
Vineet Agarwal, who is managing director at the Transport Corporation of India, is of the view that the National Logistics Policy will assist industries towards their ESG (environment, social, and governance) goals and enable focus on a better cost structure.
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