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Chapter # 17. Logistics

Objectives

  • Achieve multi-modal movement of cargo on par with global logistics standards.
  • Reduce the logistics cost to less than 10 per cent of GDP from the current level of 14 per cent.
  • Expand the logistics market to USD215 billion by 2020 from the current level of USD160 billion.1
  • Improve logistics skilling and increase jobs in the sector to 40 million by 2022-23 from about 22 million in 2016.
  • As per the approved National Trade Facilitation Action Plan, reduce border compliance time to 24 hours for exports and to 48 hours for imports by 2020.

Current Situation 

  • The Indian logistics industry employs more than 22 million people (as of 2016). Between 2011-12 and 2015-16, the logistics sector’s value has grown at a compound annual growth rate (CAGR) of 7.8 per cent. However, existing logistics costs in India are high relative to other countries.
  • Logistics costs have been estimated at 14 per cent of India’s GDP relative to 9 per cent of GDP in the United States, 11 per cent in Japan, 12 per cent in Korea and 14.9 per cent in China.2 A 10 per cent decrease in indirect logistics cost has the potential to increase exports by 5-8 per cent.3
  • Recognizing its importance for exports and growth, the government has included logistics in the harmo-nized master list of the infrastructure subsector. This will ease access to credit and simplify the approvals process for building infrastructure in the sector.
  • The government has also created a new Logistics Division in the Ministry of Commerce and Industry that will focus on the integrated development of the logistics sector, improving procedures and introduc-ing new technologies.
  • Infrastructure or transport quality is a particular area of concern for the logistics sector. About 35 per cent of export-import cargo originates in or is destined for hinterland locations. The World Economic Forum’s Global Competitiveness Index (GCI) ranked India 66th out of 137 countries in infrastructure in 2017-18.
  • The World Bank’s Ease of Doing Business ranks India 146 out of 190 countries in ‘trading across borders’. India ranks lower than China (96), Vietnam (93), Sri Lanka (90) and Indonesia (108).

Constraints

  1. Cost of logistics: The cost of logistics remains high due to challenges in accessing finance, underdeveloped infrastructure, poor connectivity and an unfavourable modal mix.
  2. Coordination due to multiple stakeholders’ involvement: Logistics has four key components that account for the majority of the sector: transport, warehousing, freight forwarding and value added logistics. Each of these falls under different segments of regulatory oversight, which adds complexity to the system. The presence of multiple agencies often leads to duplicate processes. Further, non-uniform documentation across states adds to transaction costs. While the recently implemented Goods and Services Tax (GST) has simplified documentation requirements across states to some extent, there still remains further room for improvement. Countries with multiple agencies in logistics have reduced efficiency, coordination and competitiveness.4
  3. Warehousing capacity and fragmented structure: India’s current reported warehousing capacity is 108.75 million metric tonnes (MMT) of which the private sector makes up less than 20 per cent. There is low value addition in the warehouse sector. Handling and warehousing facilities are still largely un-mechanized with manual loading, unloading and handling in the case of many commodities.
  4. Seamless movement of goods across modes and high dwell time: In addition to lack of interoperable technology, the movement of goods across modes suffers from the absence of last mile connectivity and infrastructure. For example, poor road and rail connectivity to most non-major ports leads to delays in travel time. The share of cargo moving through coastal shipping is small, primarily due to the lack of infrastructure and connectivity for feeder ships that operate between smaller container ports.
  5. Competition and underutilized capacity: There is no level playing field as the public sector is provided benefits that are not available to private players such as container train operators or foreign vessel owners, leading to limited competition, capacity underutilization and other inefficiencies.
  6. Interoperable technology across modes: The lack of interoperability of software systems used by the authorities governing different modes of transport leads to inefficiencies as it increases transit time and the need for manual intervention when switching modes.
  7. Border compliance and document processing time: India’s average border compliance time (including customs regulations and mandatory inspections) for exports is 106 hours and for imports 264 hours. India’s document processing time (including documentary compliance for various agencies including regulators) is an average of 38 hours for exports and 61 hours for imports.

Way Forward

  1. Rationalize tariffs and determine prices in an efficient manner across different modes: Tariff policies need to be rationalized. The Railways chapter provides details on rail freight while the Civil Aviation chapter highlights the need to determine air cargo tariffs in a consistent manner across airports.
  2. Create an overarching body that maintains a repository of all transport data: Such a body or institute will be responsible for acquiring, man-aging and disseminating data to internal stake-holders. The proposed institute can also conduct robust analysis of the data, which it should make publicly available. This body can be a part of the logistics portal that is under development.
  3. Enhance efficiency of warehouses and their operation, especially to optimize food storageCreate vertical silos for food storage and transport food grains by specialized wagons. We could operate smaller silos at the mandi level connected to mother silos that have bulk handling and rail connectivity. Further, specialized wagons with top loading and bottom discharge functions should be made available for handling grains. These measures will help reduce food losses.
  • Optimize existing warehouse space. Existing warehouses can be converted into multi-storeyed ones to store multiple commodities at the same time. This will greatly increase warehousing space.
  1. Increase emphasis on multimodal solutions: Setting up multimodal logistics parks will help address issues related to underdeveloped infrastructure, an unfavourable modal mix and connectivity. The government has already approved 24 logistics parks under the Bharatma-la programme and seven have been identified under the Sagarmala programme. These may be completed by 2022-23. They should reflect best practices from global logistics parks with respect to comprehensive development and synergies across modes of transport.
  2. Allow private players to operate in CON-COR and port terminals: There is no level playing field for private container train opera-tors (CTOs) vis-à-vis the Container Corporation of India (CONCOR). Providing shared space at CONCOR terminals to private CTOs will help utilize the infrastructure better. Similarly, opening up port terminals to private players at a fee will enhance capacity utilization.
  3. Increase technology use to enhance logistics: 
  • Integrate technologies across modes of trans-port by developing an integrated information technology (IT) platform. Increasing the interoperability of technology across modes by implementing container tracking systems, radio frequency identification (RFID), etc., will reduce delays and enhance efficiency. The integrated IT platform should be a single window for all logistics related matters. The portal should be linked to the IT systems of all transport modes, and customs and state transport authorities. It should act as a logistics marketplace.
  • Create an institutional mechanism for technology adoption in transport. India needs to create an office, similar to the Office of the Assistant Secretary for Research and Technology (OST-R) in the USA, under the Commerce Ministry’s newly created Logistics Division to advance the use of innovation, develop technology and create a skilled interdisciplinary transportation workforce.
  1. Shift towards international standards for transport equipment and software: To increase efficiency and ensure compatibility, we should gradually adopt international standards, especially in operations, and adopt global benchmarking on unit load devices such as containers and pallets. While this will require changes in the overall infrastructure of ships, ports and railways, it will help realize savings in cost, time and accounting. Associated handling equipment such as forklifts, cranes, tractors, scanning and inspection technologies, and flatbed rail wagons should be standardized and become ubiquitous.



Chapter # 41. Data Led Governance and Policy Making

Objectives Evidence based policy making should be made integral to the overall governance structure in New India, 2022-23. To achieve this, timely gen

Chapter # 40. Optimizing the Use of Land Resources

Optimizing the Use of Land Resources-Ensuring that land markets function smoothly, through efficient allocation of land across uses, provision of secu

Chapter # 39. Modernizing City Governance For Urban Transformation

Objective  City Governance For Urban Transformation To transform our cities into economically vibrant and environmentally sustainable habitats that p

Chapter # 38. Civil Services Reforms

Objective  civil-services-reforms To put in place a reformed system of recruitment, training and performance evaluation of the civil service to ensur

Chapter # 37. Legal, Judicial and Police Reforms

Objective To ensure the safety and security of citizens and ensure access to effective legal systems and speedy delivery of justice. Current Situation

Chapter # 36. The North-East Region

Objectives The North-East Region (NER) should: Have adequate road, rail and air connectivity, waterways, internet connectivity and financial inclusion

Chapter # 35. Balanced Regional Development: Transforming Aspirational Districts

Objective  Balanced Regional Development: Transforming Aspirational Districts Achieve balanced development in India by uplifting 115 districts, curre

Chapter # 34. Scheduled Castes (SCs), Scheduled Tribes (STs), Other Backward Classes (OBCs), Other Tribal Groups and Minorities

SCs, STs, OBCs, De-Notified Tribes (DNTs), Nomadic Tribes (NTs) and Semi-Nomadic Tribes (SNTs) Objective  To accelerate the socio-economic developm

Chapter # 33. Senior Citizens, Persons with Disability and Transgender Persons

SENIOR CITIZENS  Objective To ensure a life of dignity, social security and safety for senior citizens, enabling them to actively participate in econ

Chapter # 32. Gender

Objective  To create an enabling environment, sans institutional and structural barriers. To enhance the female labour force participation rate to at

Chapter # 31. Nutrition

Objectives  Under POSHAN Abhiyaan, achieve the following outcomes by 2022-23, compared to the baseline of 2015-16 (National Family Health Survey-4):

Chapter # 30. Universal Health Coverage

Objectives  On the strong platform of Pradhan Mantri – Jan Arogya Yojana (PM-JAY): Attain a coverage of at least 75 per cent of the population

Chapter # 29. Human Resources for Health

Objectives  Achieve a doctor-population ratio of at least 1:1400 (WHO norm 1:1000) and nurse-population ratio of at least 1:500 (WHO norm 1:400) by 2

Chapter # 28. Comprehensive Primary Health Care

Objectives  Under Ayushman Bharat, scale-up a new vision for comprehensive primary health care across the country, built on the platform of health an

Chapter # 27. Public Health Management and Action

Objectives  To revamp radically the public and preventive health system in the nation through the following strategic interventions: Mobilize public

Chapter # 26. Skill Development

Obejctives  For harnessing the demographic advantage that it enjoys, India needs to build the capacity and infrastructure for skilling/reskilling/up-

Chapter # 25. Teacher Education and Training

Objectives There cannot be a quality education system without quality teachers. Therefore, a thorough revamp of the entire ecosystem of teacher educat

Chapter # 24. Higher Education

Objectives  Increase the gross enrolment ratio (GER) in higher education from 25 per cent in 2016-17 to 35 per cent by 2022-23. Make higher education

23. School Education

Objectives Universal access and retention: o Hundred per cent enrolment and retention at elementary education and secondary education levels; achieve

Chapter # 22. Sustainable Environment

Objective  The objective is to maintain a clean, green and healthy environment with peoples’ participation to support higher and inclusive economic

Chapter # 21. Water Resources

Objectives By 2022-23, India’s water resources management strategy should facilitate water security to ensure adequate availability of water for l

Chapter # 20. Swash Bharat Mission

Objectives The key objectives of the Swachh Bharat Mission include: 1. Making India Open Defecation Free (ODF) by October 2, 2019. 2. Carrying out ext

Chapter # 19.Smart Cities for Urban Transformation

Objectives  Leverage the ‘Smart Cities’ concept in select urban clusters to: Drive job creation and economic growth. Significantly improve effici

Chapter # 18. Digital Connectivity

Objectives Given the relevance of digital connectivity to economic growth and the need to eliminate the digital divide by 2022-23, India should aim to

Chapter # 17. Logistics

Objectives Achieve multi-modal movement of cargo on par with global logistics standards. Reduce the logistics cost to less than 10 per cent of GDP fro

Chapter # 16.Ports, Shipping and Inland Waterways

Objectives  Double the share of freight transported by coastal shipping and inland waterways from 6 per cent in 2016-171 to 12 per cent by 2025. Incr

Chapter # 15. Civil Aviation

Objectives Enhance the affordability of flying to enable an increase in domestic ticket sales from 103.75 million in 2016-171 to 300 million by 2022.2

Chapter # 14. Railways

Objectives By 2022-23, India should have a rail network that is not only efficient, reliable and safe, but is also cost-effective and accessible, both

Chapter # 13. Surface Transport

Objectives Increasing the coverage and quality of roads and highways is critical to enhancing connectivity and internal and external trade. By 2022-23

Chapter # 12. Energy

Objectives The government’s on-going energy sector policies aim “to provide access to affordable, reliable, sustainable and modern energy”. At t

Chapter # 11. Minerals

Objectives Double the area explored from 10 per cent of obvious geological potential (OGP) area to 20 per cent.1 Accelerate the growth of the mining s

Chapter # 10. Travel, Tourism and Hospitality

Objectives  Increase India’s share in global international tourist arrivals from 1.18 per cent to 3 per cent. Increase the number of foreign touris

Chapter # 9. Housing For All

Objectives Provide every family with a pucca house, with a water connection, toilet facilities, and 24×7 electricity supply and access. Build 2.9

Chapter # 8. Financial Inclusion

Objectives Banking for the unbanked  o Bank accounts: Ensuring universal access to bank accounts, which are a gateway to all financial services.  o

Chapter # 7.Doubling Farmers’ Income (III): Value Chain & Rural Infrastructure

Objectives • Transform the rural economy through the creation of modern rural infrastructure and an integrated value chain system. • Leverage the

Chapter # 6.Doubling Farmers’ Income (II): Policy & Governance

Objectives Create a policy environment that enables income security for farmers, whilst maintaining India’s food security. Encourage the participati

Chapter # 5.Doubling Farmers’ Income (I): Modernizing Agriculture

Objectives • Modernize agricultural technology, increase productivity, efficiency and crop diversification. • Generate income and employment throu

Chapter # 4.Industry

Objectives Double the current growth rate of the manufac-turing sector by 2022. Promote in a planned manner the adoption of the latest technology adva

Chapter # 3. Technology and Innovation

Objectives India should be among the top 50 countries in the Global Innovation Index by 2022-23.1 Five of our scientific research institutions should

Chapter # 2.Employment and Labour Reforms

Objectives Complete codification of central labour laws into four codes by 2019. Increase female labour force participation to at least 30 per cent by

Chapter # 1 Growth (India @ 75)

Objectives Steadily accelerate the gross domestic product(GDP) growth rate to achieve a target of about 8 per cent during 2018-23 This will raise the

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