National Logistics Policy - Laying the groundwork for future
India’s new National Logistics Policy is a game changer for the logistics industry to grow and transform into a more collaborative and organized sector. A critical blueprint for the country to develop infrastructure that will serve to increase efficiency and reduce overall logistics costs that will enhance India’s trade competitiveness. We delve into its salient points
India ranked 44th on the World Bank’s Logistics Performance Index (LPI), which was last published in 2018. Notably, India’s $200 billion logistics sector has always remained in the shadows when it came to supportive policies and getting the government’s attention. However much of that changed, when the National Logistics Policy was launched on the 17th of September, 2022 by Indian Prime Minister Narendra Modi.
The NLP is a many-pronged effort by the Indian government to put India on the path of becoming a global manufacturing hub, making it a $5 trillion economy by 2025 and a developed country by 2047. It also aims to create inter-ministerial cooperation and help in seamlessly integrating the supply chain.
“To ensure quick last-mile delivery, end transport-related challenges, save time and money of the manufacturers, prevent wastage of the agro-products, concerted efforts were made and one of the manifestations of those efforts is today’s National Logistics Policy,” the Prime Minister had said.
While launching the policy, the PM enumerated the PM GatiShakti National Master Plan, Sagarmala, Bharatmala, the work done for building Dedicated Freight Corridors, the Kisan Rail, Kisan Udan experiments, Krishi Udan, various PLI schemes, the paperless EXIM trade process through e-Sanchit, the faceless assessment for customs, provisions for E-way bills, FASTag, GST and the recent changes done in the drone policy as paving the way for the NLP to come into being.
“From 13-14 percent logistics cost, we should all aim to bring it to single-digit as soon as possible. This, in a way, is a low-hanging fruit, if we have to become globally competitive”, the PM emphasized.
Some of the hallmarks of the NLP include the Comprehensive Logistics Action Plan (CLAP), which includes the components of the Integration of Digital System (IDS) for information exchange between departments, the Unified Logistics Interface Platform (ULIP), which is a single platform for supply chain and logistics, the Ease of Logistics (ELOG) portal meant for faster issue resolution through direct access to authorities and the System Improvement Group(SIG) among others.
The NLP will see the setting up of the Network Planning Group and the SIG(Service Improvement Group) to improve coordination across ministries and between the central and state governments.
Warehousing veteran and CEO of Gubba Cold Storage, Gubba Kiran, told the publication, “This policy will aim at making India’s logistics to global standards. Implementing the NLP will enhance the competitiveness of Indian commodities at home and in international markets, enhance the efficiency of multiple industries, and boost the value of services. This will boost India’s position as a manufacturing hub, permit deeper integration into global value chains, enable the nation to capture a larger proportion of international trade, and accelerate economic growth.”
Made for multimodal
Globally, only 25 percent of cargo is handled by road transportation compared to India’s 60% which puts a lot of pressure on one mode of transport.
Meanwhile, only 32% of cargo is handled by the railways and 5% by waterways. This leads to higher cost of logistics and affects the margins and competitiveness of India’s exports and manufacturing might.
This higher cost of logistics ends up eating into the margins and competitiveness of the Indian export industry. If the situation does not improve, it is expected that the high cost of logistics itself will affect the export sector by about $500 billion by 2030. This is something that the NLP is looking to tackle.
Commenting on the multimodal push in the policy, Homi Katgara, Partner at leading logistics firm Jeena & Company told The Indian Transport & Logistics News (ITLN), “Developing a robust multimodal ecosystem will improve the current freight movement, and enable faster deliveries of goods amongst customers, manufacturers and sellers. The strong push being given towards building a strong multimodal infrastructure has so far positively reflected in terms of encouraging higher investment from logistics companies in the sector.”
Underlining the potential of ULIP along with Gati Shakti for the Indian industry, Yogesh Dhingra, CEO & Founder of express logistics company Smartr Logistics said, “The PM GatiShakti initiative for establishing intermodal connectivity as well as the development of warehousing, fulfillment centers, logistics parks, ports, and airports will allow for increased capacity and faster transit times. Additionally, the ULIP will allow for cross-sectoral information sharing for all logistics stakeholders in a transparent and real-time manner.”
Dhingra added, “The government’s Multi-Modal Logistics Parks (MMLPs) initiative under NLP to develop logistics parks will benefit by creating more consolidated infrastructure in a hub-and-spoke model and encourage private sector investment in the warehousing sector. The MMLP zones will be a huge benefit to the country’s logistics sector by reducing overall costs and time as well as reducing vehicular pollution and alleviating traffic congestion by consolidating pickup and delivery points for bulk movement thus improving first and last-mile connectivity. Express logistics players such as Smartr can be closer to customer inventory, which will lead to a direct cost and time saving for all stakeholders.”
Rallying for rail
Highlighting how the policy can buoy the rail sector, Yogesh Dhingra added, “Rail is one of the most efficient forms of goods transportation and will play a vital role in lowering carbon emissions within transportation. The push for multimodal infrastructure and enhancement of rail will promote more efficient intercity connectivity. Allocating provisions towards the development of rail infrastructure to expand track routes, container capacity, building new cargo terminals and warehousing capacity will lead to an optimal integrated logistics system.”
Industry players believe that the railways also need to chalk out a competitive pricing strategy that makes it a viable option for shipping goods and ultimately aids the logistics sector.
Gautam Kumar, COO & Co-founder of logistics SaaS company FarEye told the publication, “Yes, the goal to reduce dependence on the road network will work out in the long run only if the railways chip in with a robust freight movement strategy to support the logistics sector in the country. This means focusing on high-speed freight corridors, increasing line-haul capacity, and building terminal facilities. “
Emphasis on digitalization
Digitising systems, simplification of the regulatory framework, and creating industry benchmarks are some of the other hallmarks of the NLP.
The ULIP for instance is a highly integrated platform that will bring all the digital services related to the transportation sector into a single portal. Around 30 systems of seven ministries have been integrated with ULIP covering over 1600 data fields. ULIP is slated to provide direct and indirect benefits like monitoring of cargo movement, consignment tracking, and inventory management thereby helping in executing structured planning to the stakeholders.
The platform is receiving tremendous response from the industry and as per the Ministry of Commerce & Industry, to date, close to 13 organizations including MapMyIndia, CargoExchange, Freight Fox, Conmove, Intugine, Eikonatech, Yes Bank, Superprocure, CargoShakti, CloudStrats, Shyplite, APSEZL, and AITWA have signed Non-Disclosure Agreement (NDA) to access data on ULIP. Meanwhile, NDAs with 11 more organizations like Instavans & Trucks, Bosch India, Portlinks, Shiprocket, etc. are in the process.
The NLP is expected to bring in global standards in India’s logistics sector with its focus on expediting last-mile delivery via digitization and technology integration that will save companies both time and money.
Gautam Kumar believes that ULIP will bring more visibility and transparency to the logistics sector and help companies become more cost-efficient in the last mile.
He added, “The ULIP will bring down the high supply chain costs in the country and help India achieve the global benchmark and it is expected to save nearly ₹4L crores ($48.28 billion) annually. It not only promises to bring all the stakeholders on one platform but will also harness the power of data analytics and reduce red tape to facilitate the seamless movement of cargo within the country. The platform will enable smart, proactive decision-making and promote the ‘ease of doing business’ for companies. It will help stakeholders in the logistics industry monitor real-time cargo movement, manage inventory, get rid of laborious documentation, and enable better workforce management.”
Stressing that a move towards technologies like blockchain, and AI would be beneficial for the Indian logistics industry, Homi Katgara points out, “With increased global trade demands and customer expectations, digital solutions have become essential to industry growth. Because of the involvement of multiple stakeholders in several countries throughout the supply chain, the digital transformation of organizations and operations is critical.”
Katgara added, “The government is already working towards various aspects of digitalization and combining ULIP data with AI and ML capabilities that can help forecast trends and produce fact-based responses that can be carried out by both government and businesses.”
Speaking about how the government can go about incentivizing digital transformation in the industry, Abhijit Verma, Managing Director, AA Holdings & Avinya Industrial & Logistic Park told the publication, “We feel integrating various technology-focused schemes run by the government for the development of low-cost prototypes will further amplify the adoption of such technologies. Similarly, offering tax benefits with a sunset clause will encourage developers to actively invest in such technologies which will in turn benefit the ecosystem.”
Meanwhile, Gubba Kiran told ITLN that streamlining a structure to trace the benefits of the Unified Logistics Interface Platform (ULIP), the Ease of Logistics Services platform & e-handbook on warehousing, training courses on PM GatiShakti and logistics on i-Got platform that was launched with these policies can be done to maximize the impact of digitalization in the logistics sector.
More room for investments
The logistics industry currently faces several challenges including high transportation costs, the slow movement of goods across state borders, lack of digitalization, and lack of skilled manpower among other things.
Many players like Abhijit Verma believe that investments will trickle by in a way similar to when the government launched the ‘Make in India’ which saw the highest annual Foreign Direct Investment (FDI) inflows worth $83.57 billion being reported in the country during the financial year 2021-22, while the FDI equity inflows in manufacturing rose by 76% in FY 2021-22.
Verma observes, “A well-thought-out policy made in conjunction with all the stakeholders involved, sets the foundation for an attractive investment proposition. From bringing in standardization in warehousing design to developing and implementing the digital infrastructure to link multiple data sources and sub-sector specific plans, a constant upgradation will bring in wide-ranging developments which will fastrack the sector’s development.”
A win for warehousing
As per government figures, the India warehousing market was valued at $14.65 billion in 2019 and is forecasted to grow at a CAGR of 9.82% to reach $19.53 billion by 2025, by opening it up to private investments and by ensuring that relevant benefits can be gained from the contribution of private players.
Warehousing and related assets are integral to the overall logistics sector. However, standardization in warehousing value chains is essential for reducing costs, improving efficiency, and ensuring global compatibility as well as the competitiveness.
The policy is likely to support the burgeoning demand for e-commerce services in the country, requiring faster movement of customer shipments and opening up immense opportunities for warehouse developers.
Batting for the boost to the warehousing sector in the policy, Yogesh Dhingra said, “The launch of the E-handbook on warehousing standards is a great example of creating benchmarks in the development of physical assets which will promote health and safety and enhance quality. We would also welcome similar guidelines and promote more digitisation from a regulatory standpoint in other aspects of physical infrastructure development such as clearance of land, zoning, occupancy, and ease of property records registration and verification to make construction and leasing activities more efficient for end users.”
With the industry putting so much faith and optimism in the potential of NLP, perhaps it may soon be India’s time to be ranked among the top 25 nations on the LPI and shine.