National Logistic Policy - A latest attempt to make India a global manufacturing hub.
The government is preparing for another significant transformational push that is essential for the nation's Atmanirbhar Bharat aims after zealously promoting domestic manufacturing. The recent action taken by Prime Minister Narendra Modi could be vital for restoring the nation's struggling logistics industry and enhancing domestic manufacturing in India.
The National Logistics Policy (NLP), which was introduced by the PM last week, received approval from the union cabinet yesterday.?The industry analysts are anxiously waiting for the country's first holistic approach to the $200 billion sectors.
To close the efficiency gap, the policy is planned to put an emphasis on areas including process re-engineering, digitization, multi-modal transport, and will introduce an integrated and technologically enabled approach to logistics operations.
What PM Modi Said?
"We are the world's 5th largest economy. India is setting new targets for exports and we have been able to achieve those targets. India is emerging as a global manufacturing hub and the world has started recognizing that fact. NLP will provide a fresh impetus to it," said Modi.
Modi added that the turnaround of container vessels at ports has been reduced from 44 hours to 26 hours. Drone transportation is also likely to emerge as a significant logistics mode.
New eco-friendly waterways are being set up, 40 air cargo terminals have been set up to facilitate exports, 30 airports have cold storage facilities, and 35 multi-modal logistics facilities are being set up.
Need for National Logistics Policy
According to estimates, India's logistics market is worth more than $200 billion, yet the industry is unorganized because no single body oversees it.
The Commerce Ministry describes the industry as complicated, with more than 20 government organizations, 40 PGAs (Partner Government Agencies), 37 councils for export promotion, 500 certifications, and more than 10,000 items. Additionally, it involves 50 IT ecosystems, banks, and insurance companies, as well as 200 shipping companies, 36 logistics services, 129 inland container depots, 168 container freight stations, and 50 IT ecosystems.
More than 22 million people rely on the logistics industry for their livelihood, and upgrading it will enable a 10% fall in indirect logistics costs, leading to a gain of 5 to 8% in exports, the commerce ministry stated in a statement.
Impact of Higher cost
As per an Arthur D. Little-CII report, higher logistics cost is leading to a competitiveness gap of$180 billion for India, and this gap is likely to go up to $500 billion by 2030.
Experts highlight the high logistics costs can be attributed to an unfavorable policy regime, and an under-leveraged multimodal transport system heavily skewed in favor of road transport.
Aim of the policy?
India's logistics sector is largely unorganized and fragmented, which is why the country's logistics costs are as high as 14-15% of the GDP, against 7-8% in developed nations such as Europe, Japan, and America, which leverage it to boost exports. The NLP aims to bring down India's logistics cost to a single digit in the next five years.
India placed 44th in the most recent World Bank Logistics Performance Index ranking, which was issued in 2018. By 2030, India hopes to be among the top 20 nations.
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According to the CIPHET analysis, 16% of fruits and vegetables are wasted each year in the nation because of a substandard infrastructure in the supply chain. Additionally, up to 10% of the cereals, pulses, and oilseeds that are grown in India are completely wasted.
The policy seeks to limit losses incurred while transporting perishable commodities to under 5% by improving the warehouse facilities and cold chain efficiency.
In an attempt to solve concerns about high costs and inefficiencies, the policy lays out a comprehensive interdisciplinary, cross-sectoral, and multijurisdictional framework for the expansion of the entire logistics ecosystem.
The NLP will aim to harness technologies such as AI and blockchain. It aims to create a data analytics center for driving greater transparency and continuous monitoring of key logistics metrics.
Under NLP, a single window portal will be created, where service providers such as warehousing providers, shipping experts, transporters, customs brokers, and various governmental agencies will be unified.
5 Major steps Under NLP
Carbon Footprint
The logistics policy emphasizes the shift to more energy-efficient means of transportation, as well as the use of greener fuels which could reduce the supply chain's carbon footprint. Moreover, it emphasizes creating regulations for controlling vehicular noise, emissions, and wastage.
The new logistics policy also aims to incorporate green principles in the functioning of warehouses which contribute to nearly 10% of the logistics costs.
Conclusion
The logistics industry is the backbone of India's international trade, and it helps to diversify both the country's exports and its domestically produced goods. Thus, the NLP strives to encourage efficient commodities transportation and improve the competitiveness of Indian enterprises.
The programme seeks to reduce logistical issues, considerably increase exports, and ensure that small firms and the individuals who work there make money. All of this will boost the economy in a number of ways, including through the creation of jobs and the interstate and international trade of goods. India's path to becoming a logistical hub and a global manufacturing powerhouse will be paved by this regulatory change.