India’s National Logistics Policy 2022: A push for achieving global standard

As in reckoning, India’s logistics sector is highly unorganised and defragmented and runs without a cost advantage. The regulatory environment is complex due to multiple regulations governed by various stakeholders.

For example, there are more than 20 government agencies, 40 PGAs, 37 export promotion councils, 500 certifications, 10,000 commodities, and a 160 billion market size. It also involves a huge employment base, 200 shipping agencies, 36 logistics services, 129 ICDs, 168 Container Freight Stations (CFSs), 50 IT ecosystems and banks and insurance agencies. Further, 81 authorities and 500 certificates are required for Export-Import (EXIM).

In 2018, India was ranked 44th in the World Bank Logistics Performance Index, a measure through which the World Bank ranks countries based on their logistics performance. It was a felt need to have a comprehensive logistics policy as India’s economic prominence makes it essential to have simplified business procedures along with a cost advantage vis-à-vis the competing economies.

Launched on 17th September 2022, India’s National Logistics Policy (NLP) aims to lower the cost of logistics, improve liveability and further improve the Ease of Doing Business (EoDB). In the numbers, it is hard to ascertain the exact cost percentage on logistics in India while there is conformity that it is well above the average of developed countries. 

As per estimates, it seeks to reduce the logistics cost from 14 per cent of the Gross Domestic Product (GDP) to a global average of 8 per cent by 2030. Investment Information and Credit Rating Agency of India Limited (ICRA) estimates that the sector will develop at a Compound Annual Growth Rate (CAGR) of 10.5 per cent through 2025 after growing at a CAGR of 7.8 per cent over the past five years. This reflects well on the potential India has with giving a policy push to the logistics sector.

At the heart of the National Logistics Policy 2022 is a push for laying down an interdisciplinary, cross-sectoral and multi-jurisdictional framework for positioning logistics at par with developed countries by rationalising the terms and action. In a release of the Press Information Bureau (PIB), the framing of policy was primarily attributed to the cost factor:

“The need for a national logistics policy was felt since the logistics cost in India is high as compared to other developed economies. It is imperative to reduce the logistics cost in India for improving the competitiveness of Indian goods both in domestic as well as export markets. Reduced logistics cost improves efficiency cutting across various sectors of the economy, encouraging value addition and enterprise.”

Aligned with the vision of economic reforms, India’s journey in the policy space since 1991 should be seen through the prisms of both change and continuity. A vision of developing world class infrastructure through integration of stakeholders in holistic planning and implementation shall be always helpful for ensuring wishful efficiency and synergy in the execution of the project, as a steering force, it should be prioritised in the implementation phase as well. Keeping a close complementarity with the National Master Plan for Multi-modal Connectivity (GatiShakti), National Logistics Policy appears to be promising and the industry is keeping faith in it while awaiting its benefits with increased value addition and enterprise. GatiShakti plans to bring forth a monumental reform in connectivity and transportation’s infrastructural sector. To achieve this, the Master Plan shall together sixteen Ministries, including Railways and Roads, to create a unified and streamlined network of connectivity. The vision is to eliminate departmentalization and encourage seamless communication and institutionalize all-inclusive project planning.

Cutting down the response time, cost, waste and exponentially improving the coordination and efficiency for a truly robust last-mile connectivity should lead the National Logistics Policy to exactly make the impact where it is required most in a value chain. At the time when India is in a race of offering the world its manufacturing capability and thus housing the production facilities of major multinational companies (in addition to what all exists), it is sacrosanct to strategise competitiveness and processes.

Attracting new investments in the post-pandemic times will depend a lot on how the transformed processes and competitiveness are giving India an edge better than its competitors. Of late, the positive momentum shall ensure ever high demand of Indian products (besides services where India already leads) in the global market. A scenario like this will enthuse the possibilities at macro level with quality employment and economic growth.

It wouldn’t be over-optimism in recognising the logistics sector as the most crucial determinant of India’s international trade, essentially so for its key role in domestic and international movements of the products—and thus giving a much needed traction to the value system and exports. The new logistics policy is made to promote seamless movement of goods and equipping the Indian industries to cope with the challenges that are upfront as India is aspiring for a greater integration with the world market for diversifying its products and leveraging the next phase of globalisation but without compromising on its resolve of ‘self-reliance’. While it appears in dichotomy, the fact remains that India is open for the world and its enhanced industrial capacity is the next big thing to be explored through international business partnerships and collaboration. With the endowed natural and human resources and conducive business environment, the world’s largest democracy (India) is offering a hope to the world for a closer economic interface.

The Indian logistics sector provides livelihood to more than 22 million people and improving the sector will facilitate a 10 per cent decrease in indirect logistics cost leading to the growth of 5 to 8 per cent in exports. Further, it is estimated that the worth of the Indian logistics market will be around $215 billion in next two years compared to about USD 160 billion at present. The National Logistics Policy 2022 has four features that will be implemented through the Comprehensive Logistics Action Plan (CLAP):

i) Integration of Digital System (IDS): There will be digital integration of different systems of seven various departments (like road transport, railways, aviation, commerce ministries and foreign trade).

ii) Unified Logistics Interface Platform (ULIP): This ensures shorter and smoother cargo movement and enables the exchange of information confidentially on a real-time basis. This National Industrial Corridor Development Corporation (NICDC) Logistics Data Bank Project has been leveraged.

iii) Ease of Logistics (ELOG): will enable and ensure the ease of logistics business through transparency and accessibility.

iv) System Improvement Group: will monitor all logistics-related projects regularly.

Combined with previous connectivity and infrastructure improvement projects, it is expected that the National Logistics Policy will get a capacity augmentation. Among others, these include:

~ GatiShakti projects with the goal to implement infrastructure connectivity, including roadways and railways projects across the nation, in a coordinated manner.

~ Sagarmala project that envisions using the potential of the coastline and waterways to reduce the amount of infrastructure needed to reach their targets.

~ Bharatmala project that focuses on reducing critical infrastructure gaps to increase the effectiveness of road traffic circulation across the nation.

It is vital to note that there is a low rate of technological adoption across different stakeholders. Usually the logistics cost is increased by the high indirect expenses brought on by erratic supply chains and subpar first and last-mile connectivity. The above-mentioned policy interventions are to ensure that logistical problems are minimized, exports increase significantly, and small businesses and the workforce involved gain substantial profit.

The logistics sector was granted Infrastructure status in 2017 and made it easier for companies operating within these segments to raise long-term credit from banks and other financial institutions at lower rates. It also majorly helps in attracting foreign investments to the sector. The National Logistics Policy should further give an impetus to the logistics sector with a unified policy and regulatory environment for end-to-end logistics services and an overarching institutional framework that will govern the logistics sector and enhance its competitiveness. It is expected that the governments (Central/states/UTs) will come with a master plan for logistics that will cover projects planned by different ministries to ensure multimodality, optimal modal mix and addressing first and last mile connectivity.

Also, it would be important to create a single window e-logistics market and focus on the generation of employment and skills, and make Micro, Small and Medium Enterprises (MSMEs) nationally and globally competitive. For capacity-building and making the logistics sector process-driven in India, an integrated digital system will help in a big way for facilitating a unified regulatory environment and policy across the country. A unified policy environment will be helpful if seamless integration is ensured in implementation phases. Modernising the logistics sector is not an optional action plan, more so for a country like India which has a large stake in international trade and with a propensity to grow further in the world order.

The author is a policy professional, columnist and writer with a special focus on South Asia. Views expressed are personal.

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