“For the first time in the country, the government would be taking an integrated view to the development of the Logistics industry. We are creating India’s National Logistics Plan, an institution that would lay down the structure for India’s Logistics infrastructure investment to promote inter-modality and govern the regulation of Logistics services including EXIM, transport and storage to remove inefficiencies and ease bottlenecks,” proudly shares Anant Swarup, Joint Secretary (Logistics), Department of Commerce, Ministry of Commerce & Industry, Government of India, during an exclusive interview with team Celerity…
Logistics efficiency will be the next game changer. Consumers today want high quality products to be delivered at the right time at affordable prices. Efficient logistics would be a distinguishing characteristic amongst companies. Presently India has a very high logistics cost as a percentage of GDP at around 14% as compared to other nations such as Germany and United States which stand between 8-10%. Logistics systems and processes in India are currently rife with inefficiencies and bottlenecks. Reform in logistics has the potential to save USD50 billion a year, as per a report by ASSOCHAM.
The government has now created a logistics division in the Department of Commerce in addition to granting this sector infrastructure status. For the first time in the country, the government would be taking an integrated view to the development of the Logistics industry. We are creating India’s National Logistics Plan, an institution that would lay down the structure for India’s Logistics infrastructure investment to promote inter-modality and govern the regulation of Logistics services including EXIM, transport and storage to remove inefficiencies and ease bottlenecks.
We are also creating a National Trade Portal and Logistics E-marketplace. This platform would bring all logistics stakeholders in the same place. The portal would provide a single window system for grant of all regulatory approvals. It would also expand the logistics market to small and marginal players and give a push towards an organized logistics sector.
The need gaps can be broadly put into three categories – Infrastructure, Skilling & Standards and Regulatory. On the first, we are doing a commodity analysis of the top 20 commodities by domestic and EXIM freight volumes. The primary focus would be to identify the inefficiencies in the transport and storage of these commodities and develop interventions to ease such bottlenecks through regulatory streamlining and infrastructure development. Secondly, we are engaging with BIS and other partner agencies and re-looking at standards & processes and benchmarking them with international best practices. We are working with the National Skill Development Council to identify the skill gaps, develop better curriculums and closely work with the industry to identify their specific needs. Through stakeholder consultations, we are re-looking at all laws and regulations that govern the logistics sector.
The triple helix model of Government, Industry and Academia is the need of the hour. Any policymaking could only be successful if there is a frequent and free exchange of ideas between the three stakeholders. We have signed an MoU with CII specifically on logistics to closely listen to the voice of the industry. We are also creating an Institute of Logistics and trade facilitation in IIFT to act as a think tank for the government by taking inputs from the industry. We are also closely looking at creating a national logistics forum – an institutional mechanism, which provides an avenue for regular industry interaction.
Logistics is mostly in the private sector; the role of the government is limited to be the regulator and facilitator. New infrastructure is being created like Roads, Sea and Air Ports through public-private partnership. The role of the government is changing to be a facilitator to promote such partnerships. We are also in discussions to come up with a multi-modal logistics park policy which also has a huge potential for PPP.
The logistics sector provides huge opportunities for the private sector. CII has estimated that the global logistics industry is likely to grow from USD 8.2 Trillion to USD 15.5 Trillion by 2024. As the growth of the Indian economy continues to gather pace, more logistics services would be needed, and the Indian industry has to gear up to meet this need. The Indian industry also needs to deploy better processes and technology through automation, digitization and security.
The implementation of GST has a huge positive impact on logistics efficiency. Studies have confirmed that after the implementation of GST, there has been a substantial increase in the distances that were being covered per day by trucks. The Ministry of Road Transport and Highways (MORTH) is also re-looking at the standards of trucks, higher axel loads are now being permitted and digital documents are being accepted. The government through programs such as Bharatmala, Sagarmala and the Dedicated Freight Corridors are adding more infrastructure to enhance logistics efficiency. Customs has employed risk management systems and implemented the authorized Economic Operator Scheme for faster clearances. E-SANCHIT has been introduced to allow digital filing of documents and minimize human intervention. The logistics division is also tracking the performance of select ports in terms of operational and regulatory efficiency. Improving logistics efficiency is a moving puzzle, and the government is committed to pushing it forward.
The triple helix model of Government, Industry and Academia is the need of the hour. Any policy making could only be successful if there is a frequent and free exchange of ideas between the three stakeholders. We have signed an MoU with CII and are also creating an Institute of Logistics and trade facilitation in IIFT to act as a think tank for the government by taking inputs from the industry. We are also closely looking at creating a national logistics forum – an institutional mechanism, which provides an avenue for regular industry interaction.
Logistics cost can be reduced if freight can be moved to more efficient modes of transport. As part of our corridor analysis for the top 20 commodities, we are looking at the commodities and corridors where the modal shift can take place. Out of the 180 million tons of Iron Ore that is transported in the country, there is a potential to move 60 MTPA of Iron ore through pipelines as opposed to Road or Rail. Pipelines have 70% lower transportation costs as opposed to other modes. This has the potential to save the country `6,000 crores.
Study of Cement transportation in the country has revealed that development of Integrated Cement terminals, a move towards bulk as opposed to bagged cement and a push towards inland waterways and railways, has the potential to save `4,000 crores. Similarly, a study of Steel transport in the country shows that 13-14 MTPA of Steel can be moved from other modes to Coastal Shipping can alone save `300 crores a year, there exists potential to move 40 MMTA of Steel via Inland Waterways, which can save nearly `1800 crores a year. As we understand the transport of more commodities, we will identify many such interventions that promote inter-modality and promote efficiencies.
What enabling aspects would be included in the to-be-announced National Logistics Plan?
The National Logistics Plan would be the action statement of the government that would be the guiding document for the integrated development of the logistics sector in the country. This strategy document would include interventions to promote inter-modality, reduce inefficiencies in freight transport and provide an investment structure for infrastructure development.
India has already made a lot of progress in logistics efficiency. New infrastructure is being added, processes are being streamlined and regulations are being eased. The many ground-breaking policy reforms instituted by the Government of India would place India in a competitive position. The Goods and Services Tax has provided a levelled playing field for the logistics market participants and paved the way for larger capacities and greater efficiencies in logistics. We need to improve reliability of supply chains through the use of better technology, automation and digitization.
Development of logistics is predicated on infrastructure creation, increase in efficiency of services and improvement in skilling and standardization across the sector. While development of infrastructure takes time, the subsectors that require urgent attention are skilling and standards. Currently there exists a mismatch between the skills demanded by the industry and those possessed by the staff, secondly, lack of standardization leads to inefficiencies across the board.
As mentioned earlier, the logistics sector holds tremendous potential for growth. Logistics players should develop processes and services that promote efficiency. For example, air cargo transport has shown a growth of 14.5% between 2013 and 2017, MORTH constructed a record average of about 27 km/day in FY ’19. They are planning to invest another USD 82 Bn to construct 34,800 kms of roads by 2022. The government has also identified areas for the development of 35 multi modal logistics parks.
After the implementation of GST, industry has the opportunity to create large capacity warehousing facilities, the demand for warehousing is expected to grow by 57% till 2019. The penetration of logistics services is also underwhelming in India, with 3PLs accounting for 9% of the outsourced logistics revenue. India is the fastest growing large economy in the world, the e-commerce market in India is expected to reach USD 50 Bn over the next 3 years from the current USD 20 billion. This massive increase would require efficient and reliable logistics systems.
The Indian economy is primarily driven by domestic consumption. Exports and Imports of merchandise contribute to only about 28% of the economy. As Indian consumption grows, so must the efficiencies in logistics and the capacities available in our country. These increased capacities combined with reduced logistics costs will result in Indian products being globally competitive.
This task is daunting but not overwhelming. We have instituted measures to collect data from various sources. We have pursued a partnership with GSTN to access E-Way Bill data for logistics planning, additionally we are also exploring technology-based measures such as creating a way to crowd source data on congestion, graft, etc. A Data and Analytics centre is being planned, which would pool data from various channels and allow the government to make data-driven intelligent decisions. Additionally, we are coordinating with all the relevant stakeholders to ensure an integrated development of the logistics sector. We are also holding regular industry consultations to incorporate their suggestions in our policy planning.
Logistics Performance Index is a perception-based report. During the last two years, a lot of work has been done on all the six indicators. The Report at several places acknowledges India as an over performer, a top performer and a consistent performer. The Report also recognizes that since 2016, India has emphasized logistics among its high-priority economic reforms to meet challenges of large country size, congested hubs, and internal barriers to trading good and services.
Technology would be a key enabler to achieve the goals of logistics efficiency. We are creating a National Trade Portal and e-marketplace that would bring stakeholders across the logistics value chain onto a common platform. Technology will play a crucial role across efficiencies in ports, warehouses, transport.
The future of Indian logistics would be driven by four I’s – Infrastructure, Integration, Innovation and Intelligent Systems. As I have mentioned earlier, this sector holds tremendous potential and we see a very bright future for it.