March , 2023
Struggling Indian logistics industry looking forward to the National Logistics Policy
11:38 am

Kuntala Sarkar

The Indian logistics industry employs over 22 million people, acting as the backbone and connecting thread among multiple industries. The dedicated freight corridors, road, rail, and sea (ports) connectivity enables and strengthens the supply chain in India accelerating economic growth. Till 2021, the Indian logistics industry was valued at $250 billion. Industry insiders are expecting it to reach around $380 billion by 2025, with a 10-12% YoY (year on year) growth. However, the industry faced foremost challenges due to the Covid-19 lockdowns, and now high inflationary pressure is another concern in the post-Covid period.

High logistics cost in India

According to the Logistics Performance Index (LPI) released by the World Bank, India is ranking 44th globally, facing multiple challenges - one of them being the much higher cost of logistics. Rising fuel cost is one of the major reasons. The logistics cost in India mostly floats around 12-13% of the GDP mark, which shows a much higher rate than the BRICS countries and the US and Germany which are at 11%, 9.5 %, and 8% respectively. The Union government has been trying to curtail this; however, inflation is a major blockade.

National Logistics Policy (NLP)

In September 2022, PM Narendra Modi launched the National Logistics Policy (NLP) for enhancing economic growth and to boost employment. It also aims to improve the competitiveness of Indian goods in both the domestic and international markets. NLP also includes an outline of a single-window e-logistics market for promoting seamless connectivity across the country. The Indian e-commerce players and MSMEs are looking forward to this in 2023.

In India around 90% of the players come from the unorganised sector, hence a technology-driven integrated communication ecosystem is the basic need of the stakeholders.

Digitization in logistics - Unified Logistics Interface Platform

The government realised that an integrated view of the Indian logistics value chain is necessary and is aiming for a unified system by the interconnection of the information technology (IT) systems. With around 20 government agencies, 40 government partner agencies, 36 logistics services, 129 inland container depots and 168 container freight stations, it takes a lot of time to clear all paperwork. Hence, the Unified Logistics Interface Platform (ULIP), the one window platform that can provide real-time information to all stakeholders, is a part of the NLP.

It has been planned to improve the industry by curtailing unwanted delays and transport costs while enhancing sectoral efficiency. ULIP will integrate with existing data sources of ministries, exchange data with private players and provide unified document references in the supply chain.  

Infrastructural growth for ease of doing business

The two major pillars of the logistics sector are transportation and warehousing, which demand massive infrastructural growth for ease of doing business. First and last-mile connectivity along with adequate cold storage will help to reduce wastage for agri-products. The PM Gati Shakti Mission has been transforming these two segments in the past two-three years, trying to give the industry a better outlook.

The major Indian players like Blue Dart, Delhivery, Container Corporation of India, VRL Logistics, Aegis Logistics, Mahindra Logistics and TCI Express are expanding their networks gradually; however, a dedicated rail corridor for freight transport is a core demand of the industry.

Industry stakeholders are also looking forward to a better push for the multi-modal logistics parks, Dedicated Freight Corridors (DFC), with adequate air freight stations as planned in the Union budget. Additionally, the stakeholders are demanding a lesser tax burden that currently attracts 18% tax. However, without keeping the high inflationary pressures under control and lowering fuel costs, the industry will remain under pressure. 


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