INDIA TO REVISE ITS NATIONAL LOGISTICS POLICY DUE TO CORONA AND CHINA CRISIS
In Feb 2020, Finance Minister Smt. Sitharaman in her Budget speech announced about release of the National Logistics Policy.
Brief of Policy
On February 5, 2020 a draft National Logistics Policy was published for public comments by Logistics division, Department of Commerce, Ministry of Commerce & Industry.
Ever since then, government was working on this policy but due to economic stress caused by continuous lockdowns across the world and ongoing border dispute with China, Government of India is considering to revisit this policy to make it suitable for current situation.
Importance of logistics in Indian economy and need for policy
Logistics sector is one of the key sectors will enables growth of any economy. In India, logistics cost account for 13-14% of Gross Domestic Product (GDP) which is very high as compared to other developed nations like USA (9-10%), Europe 10%, Japan 11%.
Besides being highly unorganized, logistics sector in India suffers from following key challenges:
- Modal transportation mix in India is skewed with 60% of freight moving on roads, which is significantly larger than in major developed economies.
- Logistics sector is disintegrated and is being managed by varied stakeholders like ministry of Road Transport and Highways, Shipping, Railways, Civil Aviation, D/o Posts, Commerce and Industry, Finance and Home Affairs. This is in addition to large number of government agencies which operate in this sphere.
For logistics sector to become critical driver in rapid economic development of India, it needs to be made reliable, efficient and cost-effective. The decisive supply chain network has the potential to increase farmers’ income manifold, which can lead to a domino effect on the overall economy.
Such a system will also encourage investments in the country especially FDI which will have positive impact in our international trade. Thus, the draft policy document states the vision of the policy as follows:
“To drive economic growth and trade competitiveness of the country through a truly integrated, seamless, efficient, reliable and cost-effective logistics network, leveraging best in class technology, processes and skilled manpower.”
The policy document also mentions two key objectives of the policy to be achieved in next five years. One is to establish a single window of reference for all logistics and trade facilitation matters in India. This can also function as a sharing platform for knowledge and information.
And secondly, to reduce logistics cost from current levels of 13-14% to 10% as a % of GDP down to bring it in accordance with globally best standards and provide incentives to encourage the sector to become more efficient by promoting integrated development of logistics.
Policy thrust areas
The policy document has defined certain thrust or focus areas which will be the focus of concerned ministries and also act as guideline for state governments. These are:
- To put focus on high impact and critical projects to ensure an optimal modal mix and to facilitate first and last mile connectivity.
- Facilitating and encouraging development of Multi Modal Logistics Parks (MMLPs)
- Take steps to promote logistics efficiency to reduce logistics cost for movement of key commodities.
- Setting up of a single window logistics e-marketplace and Data and Analytics Center.
- Setting up of a Center of Trade facilitation and Logistics excellence (CTFL) and leveraging expertise of multilateral agencies
- Developing an Integrated National Logistics Action Plan and align with respective state development plans
- Facilitate and provide assistance for strengthening of the warehousing sector
- Enhancing transport and rolling stock infrastructure
- Making EXIM processes simple and efficient to improve trade competitiveness
- Reducing waiting time for interstate cargo movement by road
- Making efforts to ensure standardization in the logistics sector
- Seamless movement of goods at Land Customs Stations and Integrated Check Points
- Ensure employment generation, skills enhancement and gender diversity in the logistics sector
- Giving impetus to the MSME sector through efficient logistics
- Promotion of cross regional trade on e-commerce platforms by ensuring smooth flow of goods
- Encouraging Green & Sustainable Logistics
- Creation of a Start-up acceleration fund
Institutional Framework & Governance for Logistics
Owing to the complex nature of logistics sector in India with more than 20 government agencies, 40 partnering government agencies, 37 export promotion councils, 500 certifications, and 10,000 commodities, an effective and robust governance system is highly critical to carry out objectives of this policy and above-mentioned thrust areas.
The Logistics wing of Department of Commerce & Industry will have the primary responsibility in this respect and also to facilitate alignment across the key central ministries which will involve extensive data collection, coordination and monitoring across all the stakeholders.
According to the Ministry of Commerce, this policy will improve India’s trade competitiveness, provide impetus to trade and improve India’s ranking in Logistics Performance Index and pave the way for India to become a logistics hub.
The detailed draft National Logistics Policy document can be accessed from following link: