National Logistics Policy

SEP 22

Mains   > Industry and infrastructure   >   Infrastructure & Investment models   >   infrastructure

IN NEWS:

  • Recently, the Prime Minister launched the National Logistics Policy (NLP).

WHAT IS LOGISTICS?

  • Logistics encompasses planning, coordinating, storing, and moving resources —people, raw materials, inventory, equipment, etc., from one location to another, from the production points to consumption, distribution, or other production points.

NATIONAL LOGISTICS POLICY (NLP):

  • National Logistics Policy is an overarching interdisciplinary, cross-sectoral, multi-jurisdictional and comprehensive policy framework for the logistics sector. The policy complements the PM GatiShakti National Master Plan.
  • Vision:
    • The vision of the policy is to develop a technologically enabled, integrated, cost-efficient, resilient, sustainable and trusted logistics ecosystem in the country for accelerated and inclusive growth.
  • Targets:
    • Reduce the cost of logistics from 14-18 percent of GDP to global best practices of 8 percent by 2030.
    • Improve the country’s Logistics Performance Index (LPI) ranking to be among top 25 countries by 2030.
    • Create data-driven decision support systems (DSS) to enable an efficient logistics ecosystem.
    • To ensure that logistical issues are minimised, exports grow manifold, and small industries and the people working in them benefit significantly.
  • Key building blocks of the policy:
    • Unified Logistics Interface Platform (ULIP)
      • The most important building block is the Unified Logistics Interface Platform (ULIP), which aims to collapse all logistics and transport sector digital services into a single portal, thereby freeing manufacturers and exporters from the present tyranny of long and cumbersome processes.
    • Ease of Logistics Services (E-Logs)
      • It is a new digital platform. This will allow industry to directly take up operational issues with government agencies for speedy resolution.
    • The Comprehensive Logistics Action Plan
      • The Comprehensive Logistics Action Plan comprising integrated digital logistics systems, standardisation of physical assets, benchmarking service standards, human resource development, capacity building, development of logistics parks, etc.

SIGNIFICANCE OF THE POLICY:

  • Reduction in logistics costs and improves efficiency:
    • By focusing on adequate development of warehouses with optimal spatial planning, promotion of standards, digitization and automation across the logistics value chain, and better track and trace mechanisms, the NLP paves the way for a reduction in logistics costs and improves efficiency in the logistics sector. 
  • Emphasis on streamlining the defragmented logistic sector:
    • India’s logistics market is worth over $200 billion but the sector is defragmented as there is no single department that manages it.
      • According to the Commerce Ministry, the sector is complex with more than 20 government agencies, 40 PGAs (Partner Government Agencies), 37 export promotion councils, 500 certifications, over 10,000 commodities, and a $160 billion market size.
    • The National Logistics policy would end to silos and bring all departments and states together, in-line with the holistic vision of the government.
  • Improves the competitiveness of Indian goods:
    • There is a need for a national logistics policy 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.
    • Proper implementation of the National Logistics Policy would bring down logistics costs, give a fillip to international trade, help in making India ‘atmanirbhar’ or self-reliant and as a world manufacturing hub.
  • Reduces wastages in supply chain and need for huge inventory:
    • NLP would results in greater predictability, transparency and reliability in logistics sector, which will reduce the wastages in supply chain and need for huge inventory.
  • Boost to GatiShakti Master Plan:
    • The policy complements the PM GatiShakti National Master Plan.
    • NLP along with PM Gati Shakti plan will help build a more resilient logistics ecosystem in the country.
    • To know more about GatiShakti Master Plan: https://ilearncana.com/details/PM-Gati-Shakti/2577
  • Beneficial to agriculture and other sectors in the economy:
    • The policy would be highly beneficial to the farmers of the country, helping them to take their produce to the markets at a faster pace and reduce wastage and delay.
    • Improvement in logistic ecosystem would be beneficial to all sectors in the economy which will enhance economic growth and increase employment opportunities.

CHALLENGES:

  • Role of states in implementation:
    • The policy envisages digitization of the logistics ecosystem in the country to improve efficiency, but the degree of digitisation and the approach to digitisation vary from state to state. The state governments have a mixed record on this front.
    • So the states play a crucial role in the proper implementation of the policy.
  • Logistics sector is heavily dependent on roads:
    • Though the government looks to provide a roadmap to reduce the country’s dependence on road transport through the NLP, the logistics sector in India is heavily dependent on roadways.
    • The roadways have a 65% share (compared to 25% globally) while railways and waterways only account for around 35%.
    • Transporting things along the roadways is expensive - Rs.2.2 per tonne-kilometre on roads versus Rs.1.4 for rail and Rs.0.7 for waterways.
  • Structural issues with infrastructure development:
    • Land acquisition, litigation issues, alienation of local communities, environmental clearances etc are some major hurdles that delays infrastructure development in the country. This may not be solved with the NLP.
  • Huge capital expenditure requirements:
    • The creation of a robust infrastructure for an efficient logistic ecosystem requires huge capital expenditure with relatively longer gestation periods.
  •  Slow pace of infrastructure creation in India:
    • For ex: Only 30-35 km of roads are constructed in India per day as compared to 45km in China

MAJOR GOVERNMENT INITIATIVES:

  • Sagarmala
  • Bharatmala
  • Dedicated Freight Corridors
  • e-way bills
  • FASTag
  • Paperless EXIM trade process through e-sanchit
  • Faceless assessment for customs

WAY FORWARD

  • Promote federalism:
    • In taking the National Logistics Policy and Gati Shakti master plan forward, it is important to make the states of India full stakeholders since most development activity takes place at the level of states.
  • Ensure civil society participation:
    • Civil society is an equally important stakeholder and there should be a mechanism through which civil society views are gathered and feedback made available to it.
    • This will create much-needed public trust and a sense of participation in India’s infrastructure development which vital for the creation of a robust logistics sector.
  • Eliminate the structural deficiencies in railways:
    • The rail sector suffers from many structural deficiencies which have to be eliminated fast if the logistics cost has to be halved to global benchmarks.
    • The average speed of a freight train has stagnated at 25 kmph for decades, it has to be urgently doubled to 50 kmph at least.
  • Promote inland waterways:
    • The country should promote eco-friendly and cost-effective inland waterways freight movement.
    • For example, India can learn from river ports of China.
  • Promote air logistics

PRACTICE QUESTION:

Q. “National Logistics Policy has immense potential for development of infrastructure, expansion of business and increasing employment opportunities”. Discuss the statement with reference to the significance of newly launched National Logistic Policy (NLP) and challenges associated with its implementation.